How to ensure your savings support your family after you’re gone

The importance of planning for the distribution of your superannuation funds cannot be overstated, especially when considering how these assets support your family in your absence.

Many Australians diligently contribute to their retirement savings, benefiting from tax breaks and mandatory contributions, making superannuation a significant part of one’s retirement nest egg. However, it’s crucial to understand who gets to decide the fate of your super after your passing and how to guarantee that your intended heirs receive their share in the most beneficial manner.

A widespread misunderstanding is the belief that superannuation can be directly included in your Will. This is not accurate, and measures must be taken during your lifetime to ensure your wishes are fulfilled.

When aiming to maintain control over your superannuation benefits, here are several vital considerations:

Nominating a beneficiary

Determining who should benefit from your superannuation—whether it be your partner, children, a charity, friends, or a mix—is your first step. After deciding, it’s imperative to make a formal beneficiary nomination. Ensure that your chosen beneficiaries are eligible under superannuation regulations and consider the implications of your decision. Different types of nominations exist, and it’s important to remember that Wills can be contested.

Beneficiaries such as spouses and children are generally permissible under super rules. However, leaving your super to a friend or favourite charity directly through your super is not possible due to eligibility criteria. In such cases, you can appoint your legal personal representative as the beneficiary, so your super is distributed according to your Will. This approach necessitates a current, valid Will that complements your beneficiary nomination.

Lack of nomination, an invalid nomination, or absence of nomination provisions in your fund means the Trustee will determine the distribution of your super. This process can be lengthy and place additional stress on your family during an already difficult time.

Considering tax implications

Taxes on superannuation death benefits vary based on the recipient and the components of the benefit. Tax rates can reach up to 30% plus Medicare for adult children in some cases, or be completely tax-free for a spouse or dependent child. Understanding these tax implications is crucial when selecting beneficiaries or dividing your super among them.

Binding vs non-binding nominations

Some super funds permit a binding death benefit nomination, compelling trustees to distribute your super according to your wishes, independent of your Will. Non-binding nominations, however, are more like recommendations. Binding nominations provide more certainty but require regular review, especially after significant life changes such as divorce, children reaching adulthood, or other changes in circumstances.

Next steps

Consult with a financial adviser and/or solicitor (or estate planner) to ensure your nominations and Will are up-to-date and aligned with your wishes. This proactive approach helps ensure your family is cared for according to your intentions should anything happen to you.

Remember, effectively managing your estate planning, including superannuation, is a vital step in securing your family’s financial future.