google159cb6c908a25e99.html

How separation can impact your estate planning: Part 5 – Superannuation and Binding Death Nominations

divorce and super

In the final instalment of our series on how the end of a relationship impacts your estate planning, we discuss how your superannuation is treated and what steps you should take to protect it.  Click here to read parts 1, 2, 3 and 4 of our series.

What happens to superannuation when you die?

Some people may not realise that when you die, your superannuation benefits, including any life insurance held by your superannuation fund, do not form part of your estate and are not automatically distributed according to your will.

Unless you have made a valid binding death benefit nomination (BDBN), which remains effective at the date of your death, the trustee of your super fund has the discretion to decide to whom your superannuation benefits will be paid upon your death.  A BDBN allows you to nominate the beneficiary/s of your superannuation death benefits, and provided it is valid and up-to date, the trustee must pay your superannuation death benefits in accordance with that nomination.

Most BDBNs lapse after 3 years (depending on which super fund you are with) unless you renew the nomination.  Once a BDBN has lapsed it is no longer binding on the trustee of the super fund.  As such, it is important to keep your BDBN up to date.

What happens when I separate and/or divorce?

Any valid BDBN you have made with your superannuation fund is not subject to the same rules as your will and will not necessarily be revoked by your separation from your husband, wife or de facto spouse.  Depending on which superannuation fund you are with, divorce may or may not revoke your BDBN.  As such, if you separate, and your existing BDBN names your partner / spouse as the beneficiary, you should update your BDBN as soon as possible.

To ensure that your superannuation benefits are paid to your preferred beneficiaries, it is important that you make sure your BDBN is actually a binding one.  It is possible to make a non-binding death benefit nomination, however, upon your death, the trustee of super fund is not legally required to follow it and it could be objected to by a former partner / spouse.

Only a valid binding death benefit nomination cannot be objected to by an ex-spouse and will not be the subject of review by the superannuation fund or the Courts.

This is the only way to ensure that your superannuation benefits are paid to your preferred beneficiaries, rather than your ex-spouse. This is unless your superannuation death benefit is included within your notional estate in NSW. To find out more, see: Beware the Notional Estate in NSW Estate Planning – Part 1 – Fox Thomas

If you are a member of more than one superannuation fund, you will need to make a separate BDBN with each superannuation fund.

For many older people, superannuation may represent their largest asset.  When going through a separation, it is important that you take the steps to ensure that this significant asset is protected.

For more information please contact a member of our estate planning team at Fox and Thomas.