Does my Will cover what happens with my SMSF benefits?
Published 13 Mar 2019
As of June 2018, a total of 590,627 self-managed super funds (SMSFs) existed in Australia. Often times, it is one of the largest assets you might possess, which is why it's so important that you consider it when estate planning. Do you know how to ensure your SMSF benefits are distributed according to your wishes?
Wills do not govern SMSF benefits
Even if you specify within your Will who you'd like any remaining funds, or your death benefit, to go to, it's possible that the person will not receive the money. This is because your superannuation isn't legally a part of your personal estate. If the Trustees of the SMSF decide to act against your wishes, your Will has no authority to prevent this happening. Instead, the remaining Trustees have full discretion over who they pay your death benefit to.
To ensure your superannuation benefits go to the right people, you need to take further action and prepare the right documentation.
Why you should have a current binding death benefit nomination (BDBN)
You can make two types of death benefit nominations - binding and non-binding. To ensure the money goes to your nominee, a BDBN is the wisest choice.
There's two ways you can proceed with your nomination. You can either direct that your benefits are paid into your estate to then have your Will control how it's distributed, or bypass this step and specify beneficiaries that the benefit is immediately paid to. When preparing your BDBN, make sure you meet all requirements of the superannuation law as well as any criteria laid out in the SMSF Trust Deed.
A BDBN is vital for your estate planning. Some of the benefits of having a valid binding death benefit nomination include:
- Immediate dispersal of your superannuation death benefits by the Trustees of the SMSF.
- If there is a risk that someone might contest your Will, a BDBN that directly nominates beneficiaries rather than being paid out to your estate keeps your death benefit from being involved in any potential litigation.
- It removes any risk that the remaining, or replacement, Trustees will choose not to follow your wishes.
- A BDBN can help you bypass your estate if you have any significant debt or are bankrupt, ensuring your beneficiaries receive your death benefit without any creditors accessing the funds.
To ensure your BDBN is valid, it's vital that you reach out to an experienced professional to help you prepare it. If you want to ensure your SMSF benefits are paid out according to your wishes, reach out to Malouf Solicitors today.
Please call us on 02 8833 2000 to speak with a lawyer
I remain extremely grateful for Maloufs legal representation related to my financial management of the estate of my brother and for your continuing help and advice in this matter. As an aside, I always recommend Maloufs to my friends and family members who are seeking the best legal representation - only last week, I strongly advised a close family friend that their best interests would be served by arranging an appointment at your Parramatta offices.
John of Parramatta NSW