Estate planning within your superannuation fund – its not as simple as it looks

A recent determination of superannuation death benefits is a perfect example of the need for appropriate planning in relation to how your superannuation death benefits will be dealt with after death. Head of Paraplanning, Aaron Walshe takes us through the findings from this case and the key takeaways.

Aaron Walshe, Paraplanner | 22/07/2021

Estate Planning Financial Planning

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A recent determination of superannuation death benefits is a perfect example of the need for appropriate planning in relation to how your superannuation death benefits will be dealt with after death.

In a high-profile case, Magistrate Rodney Higgins was successful in his pursuit of his late fiancée’s death benefits, despite the fact that Ms Petrie had nominated her mother as her desired beneficiary. Unfortunately, superannuation laws can be quite complex and Ms Petrie’s mother was not eligible to receive the payment under the legislation. Mr Higgins and Ms Petrie made headlines in 2019 when it was revealed that the magistrate was in a romantic relationship with the court clerk, 45 years his junior.

There are a number of lessons that can be learned from situations like this one to make sure your death benefits are dealt with exactly as you would wish.

Why couldn’t Ms Petrie’s mother inherit her daughter’s superannuation balance?

Nominating a beneficiary inside super isn’t as simple as just picking anyone you like. Superannuation law governs who is eligible to receive a death benefit payment from a superannuation fund.

The list includes:

  • A spouse or de facto
  • Children
  • Any person with whom the person has an interdependency relationship (live together, financial support, domestic support etc.)
  • Legal personal representative (Estate)

Applying these rules to the case of 23-year-old Ms Petrie, it appears that Ms Petrie must have reached a position in her life where she was not interdependent with her mother.

Could this situation have been avoided?

Absolutely. If Ms Petrie had directed the trustee to pay her superannuation benefits to her estate in a binding nomination, then Rest Super would have been bound to follow her direction.

In this instance, Ms Petrie could then have directed her wishes for her estate through her will. While this may not have prevented a legal dispute, Mr Higgins would be required to challenge Ms Petrie’s will to claim any of the funds.

What happens if my nomination is invalid?

If you have nominated someone who is not a superannuation dependant as your death beneficiary with your superfund, the trustee of the fund (the superfund) has to make a choice on their own about where your benefits should go.

In the case of Ms Petrie, Rest super elected to pay her death benefit to her partner, Mr Higgins. Ms Petrie’s mother has appealed the decision and the pair have been disputing the sum for 15 months.

How can I make sure this doesn’t happen to me?

The simple answer to this question is seek advice. Your financial adviser can help you determine the easiest and most secure way to make sure that your death benefits are distributed in the way that you want them to be.

The key method to achieve this within the superannuation environment is through binding and non-binding death benefit nominations.

  • Binding nomination: this nomination will bind the trustee to follow your wishes
  • Non-binding nomination: This is more like an indication of your wishes that the trustee will consider when making the payment.

Key takeaway points:

  • Even 23-year old’s need to take time to consider their estate planning.
  • In our experience young adults in a demographic where they don’t have their own dependants yet are particularly prone to nominating parents and siblings – which may not be successful.
  • Discussing your estate planning with a financial adviser can save your loved ones a lot of heartache.

The Hopkins Group has a team of expert financial planners ready to discuss your estate planning and set up your affairs if something unexpected was to happen. Contact us to get started today!

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