There are two aspects of estate planning that should be part of any review of your will and assets, their current status and whether there is need for revision.
One is the testamentary trust discussed last month and the other is gaining control of the superannuation fund.
The super fund is not part of a deceased estate and so is not distributed under the terms of the will unless the trustee pays it to the estate.
If a member takes no action, the trustee of the superannuation fund will distribute the fund according to the fund’s trust deed, usually at the trustee’s discretion.
For many people, their superannuation fund is their most valuable asset or financial resource.
These are the pertinent points to consider in an estate planning:
• The fund does not automatically become part of a deceased estate. The trustee of the fund has control of its distribution.
• You, as a member of the fund, can direct the trustee to distribute to nominated beneficiaries, if the trust deed provides – as most funds do – via a binding death benefit nomination (a BDBN).
• There are two kinds of funds: a self-managed superannuation fund (SMSF), which is popular for family businesses; and an “industry fund”, the kind to which employers contribute (non-SMSF).
• A BDBN can be lapsing or non-lapsing, depending on the terms of the trust deed of the SMSF, and on legislation and the terms of the trust deed of a non-SMSF. Members must be alert to the possibility of a BDBN lapsing. For most SMSFs, a non-lapsing binding nomination will only lapse if it is replaced, updated or withdrawn.
For non-SMSFs, a lapsing binding nomination may be valid
• Only for a stated period, of up to three years. Accordingly, fund members must be alert to check whether the nomination is still current.
• A member may wish to ensure that the death benefit is paid to the member’s estate, rather than directly to a dependant. Payment to the estate ensures that the benefit is dealt with under the will and not by the trustee of the fund.
• Conversely, the member may prefer to nominate dependants, rather than his or her estate, where the member prefers dependants to receive the benefit without the delays that may be associated with the administration of the estate.
A BDBN provides an effective option within estate planning but increasing litigation gives cause for care and skill to ensure that the nomination itself is valid and effective.
Beginning the year with an “estate planning” resolution could lead to significant, positive consequences for your estate property and its intended beneficiaries.
Dr John de Groot is Special Counsel at de Groots Wills and Estate Lawyers. Visit degroots.com.au