Tip 1 – Locate and/or consolidate your superannuation funds
It is not uncommon to have superannuation funds held with multiple superannuation providers. Generally, during the course of your working life you open new superannuation accounts with a different provider with each new job – without consolidating the funds held with the previous provider.
It is important to consider whether you should consolidate your superannuation funds. The benefits of consolidating include saving money on fees incurred by each provider and the ease of tracking your superannuation balance, linked insurances and any death benefit nominations.
We recommend you must seek advice before consolidating as you must consider the effect of any linked insurance benefits. If you decide to consolidate funds, you must also be sure to inform your employer so that future superannuation payments are paid to an active account.
If you opt to keep superannuation with multiple providers, confirm that your death benefits from each provider will be paid to your intended beneficiaries by creating a binding death benefit nomination (BDBN).
Tip 2 – Prepare a binding death benefit nomination
Control who receives benefit of your superannuation on your death by completing a BDBN. Your superannuation death benefit usually comprises of your account balance and a life insurance component.
The BDBN is a notice given by you as a member of a superannuation fund to the trustee of your superfund nominating your beneficiaries on your death. A BDBN imposes a direct obligation on the trustee to pay your death benefits in accordance with your wishes.
Generally, most superannuation providers offer an online account to members in which you can view your account balance, update your personal details and nominate beneficiaries of your death benefit. It is important to realise that such online nominations are generally non-binding. A BDBN can only be made in writing by completing the relevant form in the presence of two independent witnesses.
You should always consider who should benefit from your superannuation, the proportions and the tax implications.
Tip 3 – Seek advice before making changes to your level or type of insurance cover
Understand the effect of removing or changing your insurance cover. Should you cause changes or removal of your insurance cover and decide to obtain insurance cover at a later stage, you may be compelled to disclose medical conditions which may impact your ability to obtain cover or impact the cost of your cover.
Tip 4 – Review your binding death benefit nomination each year during tax time
It is easy to put superannuation in the back of your mind – especially when retirement is not on the horizon. We recommend reviewing your superannuation balances and your binding death benefit nominations yearly during tax time. Consider whether your wishes or circumstances have changed (ie relationship breakdowns, entering a de facto relationship, birth of children) and whether your binding death benefit nomination is still valid.
Tip 5 – Seek advice on a superannuation clause under your Will
While superannuation death benefits are not generally an estate asset, the death benefit may be paid to the estate if:
- Your BDBN nominates your estate as a beneficiary;
- Your BDBN is invalid as the trustee of the superfund has the discretion pay to the estate; or
- You do not have a BDBN and your dependants do not make a personal claim for the death benefit.
It is important to also include a provision in your Will to account for the distribution of your superannuation in the event any benefit is paid to your estate. If you do not include such provisions under your Will and your residuary beneficiaries are deemed non-dependants under tax law, your estate can incur tax consequences.
For assistance with your estate planning, please contact Kimi Shah.