Self-managed superannuation funds are becoming increasingly popular and contain significant amounts of assets.
It is said that over the next 20 years there is going to be the greatest transfer of wealth in Australia’s history as baby boomers die and leave their superannuation assets to their children.
Given the size of those assets, it is important that you obtain advice about how your estate can be distributed according to your wishes when you die.
You do not own your superannuation assets
The first thing to remember about any assets that you have in a self-managed superannuation fund is that you do not own them. The same is true of any interest you have in a private superannuation fund. This means that any assets in your fund do not automatically form part of your estate for distribution under your Will.
Binding Death Nominations and You
The only way that you can make sure your self-managed superannuation assets are distributed according to your Will is to execute a binding death nomination which leaves those assets to your legal personal representative (i.e. your executor), for distribution according to your Will.
If you do not have a valid binding death nomination, the trustee of the fund can ignore your wishes and distribute to other dependents as they see fit. For example, in a recent case, a husband and wife had significant assets in a self-managed superannuation fund which they were the trustees of. The wife however did not want her interest in the fund to go to her husband on her death. She wanted her interest to be distributed between her children. The wife drafted a Will which stated these wishes. When she died however, the husband ignored the Will and distributed all the wife’s interest in the fund to himself. His wife’s children received nothing.
A Court ruled on the matter and agreed with the husband, that without a valid binding death nomination, he was entitled to distribute the wife’s interest to himself. By failing to sign a simple document, the wife’s wishes were ignored, and her children did not receive any of her superannuation assets on her death.
This case highlights the importance of making sure that you have considered all your options when planning what will happen with your self-managed superannuation fund assets when you die. It is vitally important to obtain appropriate legal advice on the pitfalls and benefits of any course of action you wish to take and to formalise those wishes in valid, binding legal documents.