Brisbane’s Legal Lowdown: Is your superannuation covered by your Will?

Sofie: It’s time this week for the Brisbane Legal Lowdown that we do with Attwood Marshall Lawyers, and today we’re going to dive into a question that does catch a lot of people off guard, and that is, is your superannuation actually covered by a Will that might already be in place? For many Australians superannuation is one of their most valuable assets. When it comes to estate planning, it’s also one of the most misunderstood. So, joining us to unpack it all with us today is Duncan MacDougall, Estate Litigation Senior Associate at Attwood Marshall Lawyers. Thanks for joining us.

Duncan: Thanks for having me, Sofie.

Sofie: A little bit weird to have you here at Suncorp.

Duncan: Oh, it’s a great location.

Sofie: We get to have a bit of the atmosphere of game one tonight.

Duncan: Absolutely.

Sofie: When it comes to super, let’s start with the big one, Duncan, is your superannuation automatically a part of your will or is it something that needs to be handled separately and mentioned independently?

Duncan: Yeah. Great question. When it comes to superannuation, it’s one of the biggest myths when it comes to estate planning. The short answer is no, it’s not an asset that’s automatically controlled by your will. It’s considered a trust asset. It’s handled a bit differently. It’s considered a non-estate asset, so unless you’ve directed it via binding nomination to the trustee of your Super Fund, it’s not automatically going to be forming part of the pool of assets that’s going to be controlled by your will.

Sofie: It’s an interesting one because I thought that if you went in and you placed percentages of your superannuation account with beneficiaries, which you can do, that that would be enough, but apparently that’s not enough.

Duncan: Yes, exactly. A lot of people assume that you’ve gone online, you’ve gone through your portal, whether it be QSuper, Australian Retirement Trust, or otherwise. You’ve put in some nominations, you think oh I’m covered, they’re going to benefit.

Unless you’ve completed what’s called a binding death benefit nomination, which binds the trustee of your Super Fund to make payment to those specified beneficiaries generally, that’s a form that’s going to be signed by two witnesses and then lodged with them, and you need receipt of that nomination by the Super Fund. It’s not guaranteed. It’s simply a preference nomination otherwise. So, it’s important as part of your estate planning to get that nomination in order.

Sofie: Where’s the loophole here? Because why isn’t it automatically covered in your will like another asset like your house or your bank account?

Duncan: Yeah. So, when it comes to superannuation, the government treats it a little bit differently. It’s handled by superannuation law. You are the member of the fund, but you’re not technically in control of those funds. It’s in the control of the trustee of the Super Fund who manages those funds, on your behalf.

When it comes to your superannuation, like you said, it’s a substantial asset, so a lot of people, it will include their member balance plus any associated death benefit as well. So that could be quite substantial.

Sofie: Yeah. What should people be doing, I guess the question comes with action. You know, I’m listening to you. I am at fault here. I can tell you 100 per cent. I’ve got beneficiaries in place on my account, but I knew that that wouldn’t be enough and that somebody could challenge that. I could say I want my super to go, you know, half to you and half to them or whatever. But that could be challenged if there isn’t this binding, document.

So, what should people be aware of and what should they be doing?

Duncan: Yeah. The biggest thing and it becomes a big issue especially when different claims are on foot. So when, for example, when somebody doesn’t have those binding nominations in place, it’s going to be the decision of the trustee who’s going to assess different claims, whether that be from dependent, somebody acting for dependent children, the spouse.

And now those forms there’s only a certain category of people as well, who you can nominate under those forms. So a lot of people you may have a, for instance a sibling, but they may not be financially dependent on you, so the nomination may not even be valid.

So the takeaway there is to seek advice whilst doing your estate planning, getting your will, your enduring power of attorney prepared as part of that conversation, we make sure that we’ve got that binding nomination and your superannuation is married into your estate plan.

Sofie: You mentioned disputes. If someone passes away and there’s some confusion, there’s disagreement and these things have not been put in place. That obviously is a challenge then, and the outcome could be very different from what was anticipated.

Duncan: Exactly. So you may have beneficiaries outlined under your will and thinking and assuming that it’s good, that they’re going to benefit. But when you don’t have that nomination in place and you’ve got something, you’ve got some nominations there where, for example, maybe somebody was previously married, they had dependent children together, they subsequently divorced, re-partnered, it’s going to be a challenge between that new partner and the dependent children and assessing that claim.

So, at the end of the day, that new partner who was expecting a big payout from their spouse’s super may not be getting what they expected.

Sofie: Have you already started to get calls from people inquiring how changes to the legislation will affect their superannuation?

Duncan: Yes, it’s a moving feast as well and it’s constantly changing. And as that changes it’s a good opportunity, generally we see every three years because a lot of those binding nominations although they’re binding, they can lapse.

Some funds lapse after three years. So, it’s important to review the trust deed as well. So as part of your estate planning, we review the trust deeds, especially if you’ve got a self-managed fund whereby you’ve got some family members acting as trustees of that fund rather than an industry fund, for example, QSuper or otherwise.

Sofie: That was going to be my next question, whether or not it’s any different if you have a self-funded superannuation.

Duncan: Yeah, it creates a bit of a minefield sometimes because it’s usually mum and dad who are going to be the trustees of their own fund. They may also be the members, but when family circumstances change, they re-partner, remarry, they have perhaps stepchildren from previous relationships there. It all creates a bit of an issue down the track if certain things aren’t in order.

Sofie: I will just go back. This is a lot of information for people to digest and I would say that there are people who are listening to this conversation who are hearing this for the very first time and going oh hang on a minute, I thought if my beneficiaries were in place on my account or if my trustees, if I was a trustee of my own self-managed super and I was the member, that it would just be a part of what I already own and I didn’t really give it much thought. What is the one simple thing that they should be considering to do today or maybe tomorrow to make sure that they’re covered and they know that whatever they have in place in their superannuation is taken care of as part of their will and estate?

Duncan: I would say first point of call is contact your superfund. Make sure that you have in place that binding nomination, it’s not simply a preference nomination. Again, it’s a good opportunity to get everything else in order in that respect as well.

So you’ve got your will in place, you’ve got your enduring power of attorney, and that you actually know exactly where these assets are going to fall, whether it’s going to be controlled by your will or whether it’s not. But in terms of the actions to take place, get that advice from a qualified person.

Sofie: If you go to a lawyer to get a will drawn up, and we’ve spoken about this in the past with your other colleagues who are specific lawyers in that space, will it be something that’s sort of included in your estate planning, and they will ask you that question?

Duncan: Certainly. It’s one of the first things because again like we said at the very beginning, it’s one of the biggest myths.

It’s making sure that as part of that estate planning, we make sure those binding nominations are in order for them. We then send them off to the Super Funds and even if it’s a self-managed fund, take a look at the trust deeds.

Sofie: Duncan, thank you so much. As I said, I think today we’ve all learned something. I certainly have. I’ve put it on my to do list. Duncan McDougall, who is the estate litigation senior associate at Attwood Marshall Lawyers and of course they are ready and willing and able to be able to answer any of your estate planning needs. Thanks. Duncan.

Duncan: Thank you, Sofie.