Just because almost everyone has their spouse or partner noted as the beneficiary on their superannuation doesn’t mean it is the best solution.
The Beneficiary Nomination form is one of the most important documents you complete, so you should take your time and seek appropriate advice.
- Asset Protection. Having superannuation (and associated insurance benefits) paid to your spouse/ partner directly on death creates issues in terms of protecting those funds when they end up in their hands personally. The funds can be attacked immediately and diluted by creditors and future relationships. So a $1,000,000 payout to your spouse/ partner can be halved by a future relationship, or even whittled away to 0 by creditors. There are better ways to get your super & insurance funds to your spouse / partner so they are protected from these potential events.
- Insert “My Estate” as the nominated beneficiary for super & insurance funds you wish to pass to your spouse / partner. This option will see the funds not paid to them directly – but to your Estate, and they will then be distributed in accordance with the directions in your Will.
- Set Up A Testamentary Discretionary Trust In Your Will. Following on from point 2 above, in your Will you can nominate your spouse/partner to receive the funds from your super & insurance via a Testamentary Discretionary Trust (TDT). Thus the funds will pass from your super account to the Estate to the TDT. If the TDT is set up correctly by a competent estate planning lawyer, the funds should be protected from creditors and future relationships – so the money remains for their benefit. Exactly what you were seeking.
- Nominate Your Dependant Children As Beneficiaries. Surprisingly, very few people consider this option. But nominating a child/ren provides significant tax advantages. Instead of paying your child a lump sum from your Super, a pension could be paid as an alternative. Each child can draw a pension of up to $48,000 each year – and pay $0 Pay as You Go Tax (PAYG) – due to the 15% tax rebate on pension payments.
- Everything Should Be Binding. Most super funds allow you to make your beneficiary nominations either Binding or Non-Binding. If your nomination is not Binding, then the Trustees of the Super Fund can exercise their discretion – regardless of whom you have nominated. So the only option for you to consider is a Binding Nomination.
It is important for your solicitor to consider the impact by estate creditors and disgruntled heirs when considering this strategy.
Disclaimer: The information contained in this alert is general information only, and is not intended to be legal, taxation or financial advice. ClearFP has not taken into consideration any individual’s personal circumstances, financial needs or objectives. If any persons are intending to act on the information contained in this alert, consideration should be given to the appropriateness of this general information in the light of their own objectives, financial situation or needs before acting on this information. Persons acting on any matter covered in this alert should seek independant professional advice on the application of the matter to their individual circumstances.