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Monday, August 8, 2011

Super – who gets it?

Strict rules govern how your super is distributed when you die and if you don't get it right, your super savings could be given to someone other than your desired beneficiaries.

Most people will be surprised to hear that your super doesn't always form part of your estate when you die, so it often won’t be distributed as part of your Will.

One of the most important decisions you make when you join a super fund revolves around the question of who to nominate as the beneficiaries of your super when you die.

There are limitations on who you can nominate. Superannuation law stipulates that a superannuation fund can only pay a death benefit to your partner/spouse (including a de facto spouse, whether same sex or not), children, a person who was financially dependent on you or who you had an interdependency relationship with at the time of death or your legal personal representative (i.e. your estate).

Defining an interdependency relationship can be complex. Problems are much more likely to occur when there are blended families - step children, ex-partners - therefore potentially multiple beneficiaries. If someone comes forward saying they are entitled to claim some (or all) of your super balance, the trustee will generally take their claim into account.”

The trustees of your fund will have the ultimate discretion as to who will receive your super. They will take into consideration any nomination of beneficiaries that you have made, but are often not bound by your request.

The fight over super death benefits is now such a major issue that such cases comprise a third of all complaints made to the Superannuation Complaints Tribunal, the body established to oversee disputes relating to regulated super funds.
To avoid confusion and family disputes and to ensure your super balance goes to who you choose a person should consider making a binding death benefit nomination.

This is a nomination that the trustees are generally obliged to follow. You are still limited as to who you can nominate, which must be a spouse, child, someone who you held an interdependency relationship with, or a financial dependant.

If you want your superannuation to pass to someone else, such as a friend or charity, you would need to nominate your estate as the binding beneficiary of your superannuation entitlements. Your superannuation will then be paid into your estate and distributed according to the terms of your will - you would need to nominate such people or bodies as beneficiaries of your Will.

It is important to review death benefit nominations regularly (generally they are only valid for 3 years) and to include full details of your beneficiaries.

Keeping your super fund trustee informed of any changes to your beneficiaries - or changes to their personal details - will make the task of distributing your super much less complex for all involved.

If your fund does not have binding nominations, insist that they put it into their fund. If they are unwilling or unable, it is in your best interests to seek an alternative fund. You may think that where your money goes should be your choice!

A financial adviser can help you to review your death benefit nominations to increase the likelihood of your superannuation going to your intended beneficiaries and reduce the chance of hassles or disputes amongst the people you care about.

For further information contact *Hugh Kilpatrick from RIadvice-RetireInvest on 03 9471 0080 today.

*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429. This information does not consider your personal circumstances and is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances.

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