Superannuation Death Benefits – Be Warned

Contested Estates, Probate and Deceased Estates
Superannuation Death Benefits Be Warned

As a matter of law an entitlement under a superannuation fund does not automatically form part of the assets of a deceased estate.

All superannuation funds in Australia are trusts, which are governed by their respective deeds of trust, subject to the Superannuation Industry (Supervision) Act 1993 (Cth), and administered by a trustee who holds a discretion in terms of the persons whom the trustee decides should receive the superannuation trust fund proceeds.

Wills and Estate Planning Adelaide: DIY Superannuation

Death Benefits, Estate Planning, Pensions and Retirement Planning, Superannuation and Insurance, Trusts
Wills and Estate Planning Adelaide: DIY Superannuation

Have you been watching the news recently?  It has been a challenge trying to make sense of all the current news reports on this financial crisis.

A lot of Australians choose to remain blinkered about the impact that the current crisis will continue to have in our local markets as well as globally.  If you are sitting in your home in suburban Australia thinking that all these financial crisis events don’t relate to you, you might be in for a nasty surprise.

For most people, their primary concern is the cost of petrol, rising food prices, health care and housing affordability.  Those concerns don’t magically disappear when you retire…in fact they tend to get magnified through the lense of “fixed income”.

Chances are that you have some form of superannuation and in most cases it is probably a managed super fund.

At the moment, almost all of the big managed super funds in Australia are announcing huge (20% to 30%) reductions (losses) of capital of value.  Some funds have lost more than 30%. They might try to “spin” this as no big deal, and encourage you to take a “long-term” view of the market performance.  They’ll show a graph of managed-funds values over 20 years or so, and say that you have to expect some “swings and roundabouts”.  Of course the fund managers get paid whether the fund values go up or down …

Maybe this isn’t too alarming for some people. However, if you’re in your 60’s and looking to retire the next couple of years, how do you recover from a pretty big dent in your retirement fund?

You might be forgiven for wondering just what you’ve been paying-for with those managers’ fees all these years, and whether there might be a better solution?

Genders and Partners

Wills and Estate Planning Adelaide: Risk & Retirement Estate Planning in Uncertain Times

Estate Planning, Pensions and Retirement Planning, Planning for Disability and Incapacity, Wills
Risk & Retirement Estate Planning in Uncertain Times

There is growing concern over health-care costs and world-wide economic issues at the moment, and retirees’ confidence in being able to afford a comfortable and financially secure retirement has declined to a very low level.

Some superannuation funds have recently reported their largest-ever drop in returns.

The Australian Government is publically encouraging workers to remain in the workforce after age 65.  They have relaxed the superannuation and taxation rules to make it more attractive to older workers to keep working.  Initially this was just to reduce the bill for the old-age pension which threatens to blow-out to enormous levels as the Baby-Boomer generation all retire together.

Then average life expectancies kept getting longer, so that people aged between 100 & 110 years old are the fastest growing category in Australian demographics.  This means that it is possible for some people to be on the aged-pension for longer than they were in the workforce!

At the same time, declining birth-rates over the last 20 years has led to a severe skills-shortage in the workforce, and the government wants to minimise the effect upon business (and therefore on the economy) by encouraging older workers to stick around in their jobs awhile longer.

Now, with the American recession biting into world-asset values, many boomers may no longer have the luxury of choosing to retire at 65 – they won’t be able to afford not to keep working.

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Death Benefits … Who Benefits? Do you know who will receive the benefits from your life insurance policy and superannuation fund?

Death Benefits, Estate Planning, Superannuation and Insurance, Wills
Death Benefits … Who Benefits? Do you know who will receive the benefits from your life insurance policy and superannuation fund?

You need to decide who should benefit from your assets or for whom you wish to provide financially.

You should be clear on how you want your beneficiaries to benefit – do you want them to inherit an asset, an income or cash?

Your Will cannot dictate who inherits the benefits from your life assurance policy.  You might think you can revoke the beneficiaries you have nominated on a life insurance policy by simply nominating other beneficiaries in your Will. But your loved ones might be in for a nasty surprise, when they find out (after your death) that you were wrong.

The life insurer has a contractual relationship with you as the policyholder, and they will only pay out the benefits to the beneficiaries nominated in your insurance contract, regardless of whether your Will states otherwise.

If you want to change your life insurance policy beneficiaries, you need to do this directly with your life insurance company.  You can’t do it in your Will.

Similarly, when it comes to your superannuation fund benefit, the discretion to distribute your death benefit lies with the trustees of the super fund, and they might not necessarily follow your wishes as stated on your beneficiary nomination form.  It is a complex area of the law, which may well have changed since you started with your super fund.

Death & taxes, illness & share-market corrections may be unavoidable … but they don’t have to ruin your family or your business.  Make the effort to protect the people you really care about.  Call Genders & Partners to create an integrated estate plan and avoid questions regarding death benefits in Adelaide and other areas in South Australia. And do it NOW … before it is too late.