Strategic Will Drafting: Handling Superannuation Death Benefits

Relevant For:

Business owners and individuals planning their estate, especially those with superannuation benefits.

Key Points:

• Integrate superannuation management with estate planning.
• Superannuation death benefits are not automatically part of the estate.
• Binding nominations can keep superannuation outside the estate, avoiding claims and delays.
• Directing superannuation through the estate may benefit minors or non-eligible dependents.
• Include key clauses in Wills: Equalisation, Dependents, Separate Superannuation Proceeds Trust, and Conflict of Interest.
• Seek professional advice to ensure effective estate planning and avoid litigation.

Full Article:

Estate planning and superannuation management must be integrated to prevent legal complications. Properly addressing superannuation death benefits within a Will ensures intended beneficiaries receive their due without unnecessary legal strife.

Is a Superannuation Death Benefit Part of an Estate?

A superannuation death benefit is not inherently part of an estate. It can only be managed by a Will if:

• The trustee directs it to the estate.
• The estate is designated under a binding nomination.
• It is mandated by the trust deed.

Once integrated into the estate, the Will dictates the distribution, potentially incorporating the benefit into a testamentary trust.

When Should Superannuation Death Benefits Form Part of an Estate?

This depends on individual circumstances and goals. Binding death benefit nominations can keep superannuation outside the estate, protecting it from claims and allowing quick access to funds. However, directing superannuation through the estate may be preferable for:

• Minor beneficiaries needing a testamentary trust.
• Non-eligible dependents, such as siblings.

Professional advice is essential.

Avoiding Superannuation Death Benefits in the Estate

A binding nomination ensures death benefits bypass the estate, reaching the intended beneficiary directly. Nonetheless, a Will should account for superannuation death benefits, even if steps are taken to exclude them. Binding nominations may lapse or be invalid, so it’s crucial to address this in the Will to maximise estate assets and mitigate litigation risks.

Implications of Superannuation Death Benefits in a Testamentary Trust

Using a testamentary trust for superannuation offers income streaming and beneficiary protection. However, tax treatment varies. Benefits are taxed based on the beneficiaries’ status under tax law. A trust with mixed dependent and non-dependent beneficiaries could lose tax advantages, resulting in higher taxes. Specific clauses can prevent this.

Essential Will Clauses for Superannuation