Page 20 - Advice Matters Magazine - FWP - Dec 24

How to Ensure

Your Savings

Benefit Your

Loved Ones

Most of us work hard to save for our retirement, and much, and how. This can be slow and cause unnecessary
thanks to tax concessions and compulsory contributions, strain on your loved ones at a time when they are already
superannuation often forms a large part of retirement distressed.
savings. But it’s essential to understand who controls
where your super goes if you pass away and how to ensure What about possible tax implications?
your loved ones receive the inheritance you want them to Superannuation death benefits are taxed based on the
have in the most effective way. type of beneficiary receiving them and the tax status of
the components of the death benefit. Tax can be as high
It’s a common misconception that you can include your as 30% plus Medicare for an adult child and a fund with
superannuation as part of your Will. However, this is not some untaxed elements, or it can be 0% if the beneficiary
the case, and you need to take action before you pass is your spouse or dependent child. Knowing what tax
away to make it possible. applies is vital when choosing a beneficiary or selecting
Here are a few key things you need to consider if you want the percentages left to different beneficiaries. For example,
to keep control of your superannuation benefits. one child could get a tax-free benefit, while another could
have tax applied, so percentages may need to be adjusted
Nominate a beneficiary to account for that.
The first thing to decide is who should inherit your
superannuation savings and how—for example, your What are binding vs non-binding nominations?
spouse, children, charity, friends, or a combination of these. Where a super fund allows it, a binding death benefit
nomination obligates the trustees to make the
Once you have made this decision, it is important to superannuation payments in line with the nomination
formally nominate a beneficiary or beneficiaries. However, regardless of the Will, whereas a non-binding nomination
you must make sure the superannuation rules allow you to is like a polite request asking the trustees to make the
nominate the person or people you would like to receive payment in the way you would like, hence, binding
your savings, and then you must consider the consequences nominations usually offer more certainty. Still, they can
of the choice. Remember that not all nominations are the lapse, or circumstances change. It is essential to know it
same, and Wills can be challenged.
is not a simple set-and-forget option, and regardless of
Anyone can nominate their spouse and/or children as the type, all nominations must be regularly reviewed -
beneficiaries as they meet the allowable definitions particularly if you divorce, your children become adults, or
under the superannuation rules. Wanting to leave all your circumstances change.
your superannuation to a friend or favourite charity can’t
be done this way because they won’t meet the relevant What should you do?
definition of a beneficiary. Instead, you can nominate your Ideally, call your financial adviser and/or solicitor (or estate
legal personal representative as a beneficiary, meaning planner) to ensure that you have the right nominations in
that benefits are paid to your executor and distributed in place and a current, up-to-date Will that aligns with these
line with your Will. But that means you need a good, up- nominations. That way, you can be as sure as possible that
to-date Will that aligns with this nomination: having one your loved ones are provided for in the way you want them
without the other is no good. to be in the event of your death.
Sources:
Suppose you don’t have a nomination in place, an invalid https://www.ato.gov.au/, “Tax on super benefits”, Australian
nomination, or your fund doesn’t allow nominations. In Taxation Office, Last updated 02/08/2023 (accessed
that case, the Trustee will decide who gets what, how 15/03/2024)

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DECEMBER 2024