When “Super” may not be so Super
By Sam Recht
4 October 2016
By law, all employers must pay to their employees the minimum rate of superannuation which currently stands at 9.5% of the employee’s annual salary. Many employees are members of an Industry Fund which manages these superannuation contributions. Alternatively, some have their own Self-Managed Superannuation Fund (SMSF).
In either case, in the event of a Member’s death, the amount which has accumulated, known as the Death Benefit, may be paid to a beneficiary pursuant to a Binding Death Benefit Nomination (“BDBN”). However, if there is no BDBN in place or if the Trust Deed of the Fund does not permit such nomination, the Trustee of the Superannuation Fund will determine to whom the benefit is to be paid. This may not be to whom the deceased would have preferred or nominated, for example, a surviving spouse or child of the deceased. Whilst the decision of a Trustee can ultimately be challenged in the Superannuation Complaints Tribunal, if you are not satisfied with the internal review of the Trustee’s decision, this can be an expensive and drawn out process not to mention that the beneficiary is deprived, at least for the time being, of the benefit.
The careful preparation of a BDBN cannot be emphasised enough. Most Superannuation Deeds, which are long and complicated documents, have specific requirements as to the terms and wording of a BDBN and if they are not strictly followed, this can potentially invalidate the BDBN leaving the decision of payment to the relevant Trustee.
As indicated, the Deed must permit a BDBN, which many of the older Superannuation Deeds do not cover.
Our Wills and Estate team who are experienced in knowing what to look for in your Superannuation Deed, will check if they are permitted and will draft a valid and binding BDBN for you. Alternatively, if you already have in place a BDBN and wish to have it checked for peace of mind, our team will check the Superannuation Deed and review your BDBN. We will then advise you if it meets the prescribed criteria and identify any defects that may present. This process usually takes place when reviewing a Will or taking instructions at that time, as the suitability is assessed taking into account the provisions of a Will.