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What you need to know about death and your superannuation:

Simon Curtain
Partner/Private Client Adviser
15 Mar 2012

Did you know that your superannuation benefit does not automatically form part of your estate on death?

Many people incorrectly believe that their Will  automatically dictates how their super will be paid upon their demise.

The fact is that your superannuation benefit is held on trust for you by the trustees of your super fund and it is they who are ordinarily tasked with making this decision for you.

While the trustees of a super fund are legally bound to make decisions in your best interest, there are two main ways to ensure your benefit is paid exactly as per your wishes:

Binding Death Benefit Nomination (BDBN)

A BDBN is a nomination made by a member of a super fund and instructs the trustee as to how to pay their superannuation benefit upon death. This nomination is binding and removes the risk of a trustee paying your benefit against your wishes.

There are certain rules that need to be followed to lodge a BDBN:

  • Your super fund trust deed must allow BDBN’s

You can only nominate for your superannuation benefit to be paid to a dependant (e.g. family member) or your legal personal representative (the nomination must be witnessed by two individuals).

  • Under current law, a BDBN must be renewed every three years. If however you are a member of a self managed superannuation fund then the three year rule does not apply.

Reversionary Pension Nomination (RPN)

A RPN is made when a member commences a pension with their superannuation benefit. The RPN informs the trustee that upon the members’ death the pension is to remain in force and continue to be paid to the reversionary pensioner. The reversionary pensioner must be a dependant.

A RPN is often used to ensure the original pension remains intact and that it is not inadvertently stopped at death which could result in the payment of capital gains tax or income tax going forward.

As you can see, there are quite a few factors to take into account when considering how your assets will be paid upon death. While a Will is an important piece of the estate planning puzzle, you must remember that people are generally living longer and your superannuation benefit will most likely be one of your largest assets. Care needs to be taken to ensure it is distributed in the best interests of you and your family upon death.

If you are thinking about how best to structure your superannuation in the event of death then please contact one of our advisers, who would be more than happy to discuss the possibility of a Binding Death Benefit Nomination or Reversionary Pension.

If you require specific legal advice with your regard to your query, we are able to put you in touch with lawyers who specialise in estate planning.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.