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The Ticking Time Bomb in Your Estate Plan

superannuation estate planning

When it comes to estate planning, you might be surprised that often the biggest asset that you may leave behind might not be your property pool, but rather your superannuation. In this context, you may not be aware that it does not automatically fall into line with your estate planning wishes unless you take care of a few things first. In this podcast, Steven Mahoney from OMB Solicitors discusses the ticking time bomb that may lie in your estate plan.

TRANSCRIPT

Dan: Steven, many people make a mistake by forgetting about their superannuation when it comes to estate planning. Is that your experience?

Steven: Thanks, Dan. Yes, that’s certainly the case. A lot of the clients that I deal with on a daily basis think that their superannuation automatically forms part of their estate and therefore they don’t need to deal with it. They think by doing a will, that will obviously encompass all their death benefits attached to their super, and that’s certainly not the case. They’re governed by independent pieces of legislation. You’ve got both the Succession Act, which deals with all of your personal assets, and then also the Superannuation Act, which deals with all of that separately. It’s important that we deal with both of these at the same time.

Dan: Steve, so for people listening to this podcast, and the penny has just dropped that they need to clean this up, where do they start?

Steven: Really good question. A lot of it depends whether or not you’re involved with an industry super fund, so whether it might be Sunsuper, QSuper, or whether or not you have a self-managed super fund. That’s the starting point. Once we assess that, we work out whether or not with your industry super fund, whether or not you have what’s called a binding death benefit nomination. Now, that’s just essentially lingo for a will for your super, and we then must establish who are the dependents, who are the potential people that you can distribute your death benefits to, and what’s the most appropriate format to do that.

Dan: Steve, what about those questions like, “Who will be the beneficiaries,” etc., Do they need to be asked as well in the context of considering your super?

Steven: It’s one of the main questions I get asked, because a lot of people wish to leave their super to someone they’re not actually legally able to do that. Let’s say, for argument sake, you’ve got a young person who has their super and wants to leave it to their parents. Their parents aren’t actually what’s classified as a dependent for the purposes of superannuation. The only dependents are either a spouse or a child or stepchild. That’s one of the main classes there. To make sure they’re a dependent, you can legally pass it to them, or if they do want to pass it to someone else, we need to pass it to their estate, which we can do via payment to their legal personal representative and can have the death benefits dealt with under the context of the will.

Dan: Steve, is there this inherent risk that perhaps if somebody tries to go and do this work themselves, that they could possibly make the nomination to somebody that isn’t eligible?

Steven: Absolutely, and then that may be, if there is an industry super fund, that reverts to the trustee’s discretion, so if, in the first instance, there isn’t, this isn’t taken care of, and you don’t have a binding death benefit nomination, which only lasts for three years, and that’s another very important point, because a lot of people complete these and think, “Okay, I never need to deal with that again,” but a lot of these nominations are only valid for three years. Once that time frame’s up, we go back to the drawing board.

Dan: It could be a bit of a ticking time bomb for some people, couldn’t it?

Steven: A lot of it is, and that’s exactly right, so especially with blended families, if you’ve got a vanilla family affair, husband and wife, three kids, it might not be such a complicated matter, but if there is blended families, or de facto wives, children to other partners, it really does become a complication, and we need to make sure we give this some serious thought.

Dan: Legal advice in this respect, Steve, is a no-brainer.

Steven: It is a no-brainer, and they think that spending the money might cost at the outset, but it saves considerable heartache and can keep families together if this is dealt with at the outset, dealt with properly, dealt with by a person who, obviously, has experience in this industry in estate planning matters.

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