In this podcast, Estate Planning expert, Angela Harry discusses the inherent risks of not taking your estate planning seriously, in particular one very big oversight.
| Dan: | You’ve got to feel for the devastated children of deceased airman, Daniel Leverton, the 40-year-old who died tragically while serving with mates on the Mid-North Coast of New South Wales, who have just been told by a tribunal that they will receive less than a quarter of his estate. The rest going to a woman who shared a comparatively new relationship with the former soldier.
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| Well, today I’m with Angela Harry, an Estate Planning and Litigation expert from Atwood Marshall Lawyers. Angela, how does this happen?
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| Angela: | This happens Dan because superannuation is dealt with very differently than the assets that people hold in their individual name, which pass in accordance with their will. There is a common misconception that every asset that a person owns automatically comes into their will, to be distributed in accordance with those directions.
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| What actually happens though, is when a person passes away, the assets that they own are known as estate assets and non-estate assets. So in this instance, superannuation is a non-estate asset. So it’s not an asset that automatically goes with a person’s will.
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| What actually happens is, with superannuation, it is distributed in accordance with the superannuation trust deed and is also determinative on whether there is any beneficiary nominations in place.
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| Dan: | This is obviously a very forgotten area of estate planning.
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| Angela: | Yes, so part of estate planning is not just doing your will. Estate planning should be a holistic approach to all of your assets. So with superannuation, most people will have on their beneficiary nominations, either the name of a family member, or the option of appointing their legal personal representatives.
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| Most people don’t realise that you can actually nominate a beneficiary on your superannuation fund and that that beneficiary nomination can either be binding or non-binding. Whether or not you have a binding or non-binding nomination is really going to impact where your superannuation goes when you pass away.
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| Dan: | So, what happens if family members of the deceased are not happy with the nomination? Can they appeal?
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| Angela: | Yes. So what happens is, if there is a binding nomination, as long as that binding nomination is correctly completed and nominates a dependent for superannuation purposes, so generally a spouse, child or someone who they are in an independent relationship with, then that superannuation payment is going to be paid to that beneficiary without issue.
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| When there is a non-binding nomination or no nomination in place, that is where the trustee of the superannuation fund has discretion where to pay the superannuation to. So normally what happens in those circumstances is, any people who fall within the category of depends for super purposes.
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| So in this case, it would have been the spouse and the children, who have the ability to apply to the superannuation fund, to receive a portion of the benefit. The superannuation fund trustee will then make a determination on where to pay that superannuation.
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| If the beneficiary who intended to receive more is unhappy with that decision, or if they didn’t receive anything at all, they can appeal to the trustee. If the trustee still doesn’t make the decision in their favour, then the next step is making an application to the Superannuation Complaints Tribunal, who then can make a determination on the matter.
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| Dan: | It really does underline the importance of getting your estate planning done correctly, doesn’t it? Because I’m assuming that people toddle off down to the local newsagent, or go online and search for a “free will kit” and they rarely actually associate estate planning with superannuation.
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| Angela: | Yes, that’s correct. So, a lot of people work under the mistaken assumption that the superannuation will automatically go in their will. I often see wills that people have drafted themselves where they actually gift their superannuation member balances, but you can’t do that. Because at the end of the day, with superannuation, your superannuation member balance is to be distributed in accordance with that superannuation fund’s trust deed. So where there is no binding nomination in place, the discretion goes to the trustee of that super fund.
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| So ultimately, a person that you don’t know is going to make a determination based on the applications that they receive from potential dependents, where that superannuation is going to go. And those payments can be quite high, because not only is there the member balance, there’s also a component of life insurance that’s normally attached to it.
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| Dan: | Yes, it’s funny isn’t it? Because, in the context of family law matters, we often talk about a person’s superannuation as sometimes being one of the biggest assets in the property pool.
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| Angela: | Yes, and when we do estate planning with people, people say, “Oh look, I don’t have that much.” And we look at their superannuation member accounts, and they may not have a large component in the member balance, but they may have a very large insurance policy attached to it. And a lot of people overlook that.
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| So, you may only have 20,000 or 30,000 in a member balance, but you can have hundreds of thousands of dollars in insurance attached to it.
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| Dan: | So, for people listening to this podcast, there’s really two things isn’t there? If you are considering estate planning, then get the job done right. Go and see a lawyer like yourself and the team at Atwood Marshall, who take a holistic look at everything involved. But secondly, for those people who have had their estate plan done, maybe it’s also a good reminder that they should go back and see their legal representative, and ask them what the status is of their super?
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| Angela: | Yes, that’s very important, because even if a person has done a binding nomination on their superannuation account, some funds only allow a three-year nomination, which means after three years, the binding nomination lapses and becomes non-binding. Some funds don’t even allow binding nominations. They have trustee discretion as the only way of payment of the superannuation member balance.
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| There are some funds that allow non-lapsing binding nomination, but all funds are different. So, I think the message is, when you are doing your estate planning, it needs to be a holistic approach and your lawyer and financial advisor need to be on the same page with where that superannuation is to go and to ensure that the beneficiary nominations are completed appropriately.
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