Whether you are a business owner, manager or employee, most of us accumulate superannuation during our working lives. And, whether your nest egg is small or large, chances are that you would like it to be passed on to your family or other beneficiaries. Unfortunately, the arrangements for superannuation are not always that simple, as Wills & Estates Lawyer Sarah Slattery explains.

Introduction

When you die, your superannuation death benefits (and insurance benefits) do not automatically form part of your estate, unlike most of your other assets, and are not automatically covered by your Will. This is because superannuation is not owned by you personally, but it is instead held by the trustee of the superannuation fund 'on trust' for you. This is the case whether you have a retail superannuation fund, industry superannuation fund or Self-Managed Superannuation Fund (SMSF).

After your death, the trustee of your superannuation fund will pay your death benefits in accordance with any valid nomination that you make, or otherwise in accordance with the rules of the superannuation fund and the superannuation laws.

It is therefore critical to make sure that you make a valid nomination in accordance with the rules of your superannuation fund.

Who can I nominate to receive my death benefits?

There are only certain categories of people who are eligible to receive your death benefits:

A surviving spouse
A dependent person
An interdependent person
Your estate – You can direct your death benefits to your estate by nominating your 'Legal Personal Representative'. This directs your death benefits into your estate and the terms of your Will then determine how your death benefits are to be paid to beneficiaries. For example, you could direct in your Will that your death benefits are to be shared between your siblings or parents.
A combination of the above – For example, you could make a nomination that directs 50% to your spouse and 50% to your child.

If you make a nomination to pay your death benefits to someone who falls outside these categories (e.g. a parent or sibling) then the nomination will be invalid.

It is always important to review the rules of your superannuation fund, as these will govern how you can make a nomination.

How do I make a nomination?

If you have a retail or industry superannuation fund, you can typically download a nomination form from the fund's website or alternatively contact the fund to obtain the form. It is free to make a nomination.

If you have a SMSF, there will typically be a Binding Death Benefit Nomination form annexed to the back of the SMSF Deed. Otherwise, an estate planning lawyer or accountant can prepare a form for you.

Binding or Non-Binding Nominations

There are generally two types of nominations: binding or non-binding.

Binding

It is often advisable to make a binding nomination. This is because it 'binds' the trustee of the superannuation fund to pay your death benefits in accordance with the nomination. The trustee of the superannuation fund must follow the nomination, except in a situation where the nominated person is not eligible to receive your death benefits.

Non-Binding

In contrast, a non-binding nomination will be considered by the trustee of your superannuation fund but will not 'bind' them to pay your death benefits in accordance with the nomination. The trustee will consider your wishes but they ultimately retain the power to decide how your death benefits should be paid. A binding nomination is therefore usually preferred to a non-binding nomination, however this will depend on your individual circumstances.

Lapsing or Non-Lapsing Nominations

Most binding nominations are lapsing, which means they are valid for three (3) years from the date of signing, after which time they will lapse. It is therefore critical to ensure that you keep your nominations up-to-date.

In some cases, you may be able to make a non-lapsing nomination. You should contact your superannuation fund to determine whether you can make a non-lapsing nomination. If you have a SMSF, then an estate planning lawyer can review the SMSF Deed to determine whether you can make a non-lapsing nomination.

What if I don't make a nomination or what if my nomination lapses?

If you die without a valid nomination in place, then the trustee of your superannuation fund has the power to decide how your death benefits should be paid. In making this decision, they will take into account the superannuation laws and the rules of the fund. They may also consider the terms of your Will, but are not required to do so.

The fund may distribute your death benefits to:

A surviving spouse
A dependent person
An interdependent person
Your estate – This then directs your death benefits into your estate and the terms of your Will then determine how your death benefits are to be paid
A combination of the above.

How Sharrock Pitman Legal can help?

If you would like assistance with planning for your superannuation or estate planning generally, our Accredited Specialist Wills & Estates team can provide you with advice and guidance. Please feel free to contact us on 1300 205 506 or email willsandestates@sharrockpitman.com.au.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.‍

Written by a member of our Legal Team

Sarah Slattery

For further information contact

Sarah Slattery

Sarah is an Associate Lawyer at Sharrock Pitman Legal. As a member of our Wills and Estates team, Sarah is dedicated to successfully resolving her clients matters in a cost-effective and timely manner. For further information, please contact Sarah directly on (03) 8651 3322.

What you need to know when purchasing property in a Self-Managed Super Fund

Taxes and deceased estates

Whether you are a business owner, manager or employee, most of us accumulate superannuation during our working lives. And, whether your nest egg is small or large, chances are that you would like it to be passed on to your family or other beneficiaries. Unfortunately, the arrangements for superannuation are not always that simple, as Wills & Estates Lawyer Sarah Slattery explains.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.

You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE:

(03) 8561 3318

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What happens to my superannuation when I die?

Introduction

Who can I nominate to receive my death benefits?