Imagine discovering that you do not have control about who your superannuation will go to upon your passing, even though you have documented your wishes in a will. A nasty surprise and it is occuring more than you might think.
I regularly have couples before me who are unaware that this is a condition of the super scheme they are a member of. This article is to make more people aware of these scheme conditions so that plans can be put in place to work around the structure of these specific superannuation schemes and have your intentions go to plan upon your death.
If you or someone in your family has a superannuation policy with one of the Australian Government defined benefit super schemes, read on to learn about the limitations.
Perception vs Reality
Most people believe that any superannuation payout is automatically dealt with through the actioning of the deceased’s will. This is not the case. It depends on what type of super fund they were in and whether or not there are nominations in place as to how a person’s super will be paid after death. Let me explain further…
For Government, military and defence employees there were a number of defined benefit superannuation schemes set up before compulsory superannuation came into existence.
CSS – Commonwealth Superannuation Scheme
PSS – Public Sector Superannuation Scheme
MSBS – Military Superannuation and Benefits scheme
DFRDB – Defence Force Retirement and Death Benefits
In addition, some State Government employees are members of State-based defined benefit schemes.
These schemes operate very differently to other accumulation-style superannuation funds in that they do not allow a beneficiary to be nominated. That is, there is no ability for the member to control who will receive the benefits upon their passing. Even if their will provides a direction otherwise, it is not able to be directed due to the way the scheme was established.
So, where do those super benefits go upon my death?
For people who have children from a previous relationship but have entered into another relationship, then it is likely that a significant portion of their death benefit will be paid to their current partner. If their children are over 25 or under 25 and not studying, then the children will receive no benefit from the scheme if they had a partner at the time of their passing.
While this is troublesome for blended families, it is also problematic for people in an intact relationship who wish for their super to go to their children instead of their partner.
So who will receive my death benefits?
While these defined benefit superannuation schemes are now closed to new members, the conditions of each scheme still apply to existing members. If you or a family member is a member of one of these schemes, to be confident about who death benefits will go to, it is important to seek specialist legal advice.
It is critical that you are aware of how the super death benefit will fit in with what you are doing with your will and any other assets. It is wise to seek out a specialist estate lawyer who can help you understand how death benefits are likely to flow based on your specific circumstances and then provide you advice about the best way to achieve your objectives and provide for everyone you would like to look after, even where the defined benefits of these schemes are inflexible.
Share this article with people you know who may need to be aware of the limitations of these super schemes.
The DDCS wills and estate planning team are highly experienced and specialise in helping people navigate issues like these. To discuss your circumstances, phone our team on (02) 62127600 or fill in the contact us form and our team will be in touch.