INSIGHTS WITH EVALESCO
This is a regular question that arises when I ask a client to sign a binding death benefit nomination form for their super fund. It comes with a simple answer – not to your super fund!
A bit of background
Your super benefits are not covered by your will, because super funds have a trustee who makes decisions on your benefits. You need to nominate your beneficiary so that the trustee knows who to pay your benefit to, if you were to die.
You can’t just nominate anyone to be your beneficiary. It needs to be someone who is eligible, such as a spouse, a child or anyone financially relying on you.
You can also nominate your benefits to go to your Will (especially common for people who don’t have an eligible beneficiary) – you nominate your Legal Personal Representative.
If you are in pension phase you have the option to nominate a reversionary pensioner i.e. your spouse who will continue to receive your pension payments when you die.
A super fund could probably easily track down your spouse & kids in the event of your death by sending a letter to your home address, but if you don’t have a binding death benefit nomination in place, the trustee is obligated to look further for other possible beneficiaries. They will be requiring information from your executor on all possible beneficiaries.
The main problems that are experienced
Your family is grieving for your loss right now – they don’t really want to be bogged down in paperwork.
Your family may require funds for your funeral or their continuing living expenses. Without a nomination in place, you can expect your claim to take at least a couple of months to be processed.
Taxation issues – if you nominate adult children to receive your benefit, they will need to pay tax on the funds they receive, whereas your spouse won’t.
A good outcome
We had reversionary pensions in place for one of our recently deceased clients on two super pension accounts. With a death certificate and one form per super fund, we were able to get the pension moved to the remaining spouse’s name within weeks. The spouse was happy that we got this done efficiently and with not much of a break between pension payments.
A bad outcome
A client’s husband had an industry super fund without a death nomination in place. We are currently working with her to obtain a certified birth certificate from the U.K. for one of her adult children as the trustee needs to determine his children & their eligibility. This was after they wouldn’t send us the initial paperwork to assist the client and sent subsequent paperwork after we sent in the completed application form, certified death certificate and certified drivers licence.
Most of the time it is obvious to you who your beneficiary is. You just need to make sure you tell your super fund and that what, and how, you tell them is valid.
If you have any questions about how your super fund is set up or would like some help to make sure you get this right then please get in touch. It could save your family a lot of unnecessary hassle when the time comes.
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The amount of super you’ll need when you retire depends on your big costs in retirement and the lifestyle you want. The Associate of Superannuation Funds of Australia (ASFA) estimates for a single $44,224 a year and for couples $62,562 a year is how much you may need. This is only an indicator and our advisers assess everyone’s individual circumstances.
The fees we charge for financial advice is only a fraction of the value we derive for our clients, meaning our clients are always better off after seeing us. Rarely do we encounter a new client invested appropriately for their needs, with adequate risk protection, structuring and estate planning provisions in place. Even small tweaks to a financial plan over a long period of time can result in drastically better outcomes for our clients which eclipses the fees of the financial advice. Additionally, you can opt-out of an ongoing fee arrangement at any time.
In our discovery meeting with you our advisers discuss the initial advice fee and the ongoing fees associated with our services.
After our initial phone call to discuss why you are seeking a financial adviser, we arrange a discovery meeting that outlines what is important to you, your current position, our areas of advice, our approach. We then present a Statement of Advice (SoA) to discuss your goals and our recommendations and go through the steps of how to proceed to the implementation stage. After signing the SoA, we discuss your questions, get you to sign the authority to proceed and complete any application forms before implementing the recommendations detailed in the SoA.
One thing to consider is the interest rate on your home loan in comparison to the rate of return on your super fund. Before making a decision, it’s also important to weigh up your stage in life, particularly your age and your appetite for risk. Whatever strategy you choose you’ll need to regularly review your options if you’re making regular voluntary super contributions or extra mortgage repayments. As bank interest rates move and markets fluctuate, the strategy you choose today may be different from the one that is right for you in the future
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