Continuing the Blended Families Series, another asset protection method that is often overlooked is the use of superannuation death benefits and life insurance.
Superannuation and life insurance does not automatically form part of a person’s estate to be dealt by their Will. With superannuation and life insurances, you are able to nominate beneficiaries who you wish to benefit.
Most superannuation funds will allow you to make ‘Binding Death Benefit Nominations’ (BDBNs). This is a document that binds the trustee of the fund to make payment of your superannuation to your nominated beneficiaries. However, your nominated beneficiaries have to be dependants (such as spouse, children under 18 or financial dependants).
Similarly, life insurance policies allow for the nomination of beneficiaries. Unlike BDBN’s you can nominate anyone to benefit.
The advantages of considering the use of your superannuation and life insurance is you can nominate a beneficiary (such as your minor children from a previous relationship). This will ensure the asset does not form part of your personal estate and hence cannot be contested by partners or stepchildren.
It is important to note the impact that a marriage, separation or divorce will have on a superannuation or life insurance nomination. Changing your Will to exclude a former spouse will not automatically change a superannuation or life insurance nomination, and it is essential that these are dealt with separately, even if a family law property settlement has taken place.
Other articles in this series: