The problem with dying….
No one likes to think about that point where they’ll eventually kick the bucket but it is a definite so you might want to plan a little for it. And while most of us think that assets like superannuation would just go to our partner, this might not be the case if you don’t have it appropriately documented. This is particularly important if you hold an SMSF as the rules that apply here, can really override common sense.
A case from the Supreme Court (Ioppolo & Hesford v. Conti) in 2015 highlights just how important it is to get your affairs in order. What happened in this case was that Mrs Conti died and while she had, in years gone by, nominated her husband as beneficiary to her superannuation funds held in their SMSF, these had lapsed. She did have a valid Will in place that clearly stated that her children were to be the only beneficiaries of her super and not to include her husband in any distribution of funds. When she died, her husband as a trustee of the SMSF, decided to pay out her balance to himself and therefore the children challenged this in the Supreme Court. Unfortunately for the children and poor deceased Mrs Conti, the court upheld Mr Conti’s decision to pay himself benefits as the trust deed confirmed that if a valid binding nomination wasn’t held, then remaining trustees have discretion over the distribution of member benefits from the SMSF.
So what can this case teach us? Simply, to get our estate planning affairs in order. That might mean reading and understanding the terms of your SMSF trust deed, establishing binding death benefit nominations, a non-binding death benefit nomination, a Will and Powers of Attorney.
Don’t really know what this means? Well, a binding death benefit nomination is when you have a legal document held by your super fund that you complete, sign and have witnessed that compels them to hand out any superannuation benefits when you pass to those people that you want. It’s almost set in stone so they can’t choose to pay themselves or anyone else just because they wanted to. Having a binding nomination is the best tool in your estate planning strategy as it is very hard to distribute your assets to people not nominated.
A non-binding death benefit nomination is a signed document held by your super fund that gives the trustee an idea of how you want your super distributed when you croak it, but they don’t have to follow it.
Your SMSF trust deed will be referred to if you don’t have a valid nomination on file which generally refers the decision of distribution of benefits to the remaining trustees. While this might be fine now because life is rosy with your husband/wife/partner, if you don’t keep all your estate planning measures up to date all the time, you might find that ex-partner gets all your money when you’re gone. The case listed above highlights that a Will may have no power over how the benefits are paid when coming from an SMSF with a valid trust deed.
Your Will is best drawn up by a lawyer who can make sure that you’ve got everything written correctly, and structured correctly to make sure your wishes are carried out. A Will can be contested, meaning someone could go to court to say that they think your dosh should be distributed differently. You should note that if you have a binding death benefit nomination, your superannuation doesn’t form part of your (estate) assets that would be distributed under your will. This means that it could be given out quicker and it’s harder to contest.
If you’re unsure of how your superannuation will be handled when you die, it’s best to speak to a professional who can help you review your estate planning needs, and JBS are here to help! You can contact the team here…