Australians are holding more wealth in super than ever before. Not only is the Australian Government increasing the percentage of your wage that must be paid into a super fund, but more Australians are taking advantage of the benefits that come with holding wealth in Super.
It is a common misconception that your Will dictates who gets your superannuation. Ultimately, the Trustee of your super fund decides who gets your super payout. But, how does the Trustee decide who gets it?
Firstly, the Trustee must look for a valid binding death benefit nomination (BDBN). Importantly, a BDBN is only considered valid if it is paid to someone who was a dependant of you when you die. This is your spouse, a financially dependant child or someone else financially dependant on you. There are significant tax benefits when your death benefit passes to a dependant. If you make a BDBN to anyone else, the Trustee by law will not be able to consider this when making their decision.
In the absence of a valid BDBN, and particularly where you hold your super in an industry or retail fund, the Trustee will then usually decide to pay your super to your estate. Your estate is dealt with by a valid Will (if you have one). Via your Will you can give your super to anyone you wish. No Will? Your assets are distributed in accordance with the rules of intestacy. A ‘one-size fits all’ regime!
If a grant of representation cannot be obtained for your estate, the Trustee may simply decide to pay your super to your next of kin. This should ring alarm bells for people who don’t necessarily want to provide for a next of kin, be they a parent or a sibling or siblings. Remember that an estranged next of kin is considered equal to a next of kin you maintain a great relationship with during your life.