When helping people with their estate planning, it is very common that people can become frustrated with the thought that things might get in the way of their wishes being fulfilled. It is important to get legal advice to understand your options and what you can do to try to protect your wishes.
One of the areas that can be most confusing to navigate is superannuation, and the High Court have cleared up a common misconception of the requirements to direct your superannuation on death, in the case of Hill v Zuda Pty Ltd as Trustee for the Holly Superannuation Fund & Ors [2022] HCA 21.
Gifting your superannuation is often not as simple as including it in your will. It is common that superannuation benefits will pass to a beneficiary directly from the super fund without passing to the estate and being directed by the wishes in the will.
Nominating Beneficiaries
The best way to direct where your superannuation death benefits will pass is by making a nomination to the trustee of the super fund.
There is a lot to consider in taking into account legislation such as the Superannuation Industry (Supervision) Act 1993 and its associated regulation, and in the terms of the trust deed when making a nomination. Whether a person or entity is considered to be a tax dependent, or a superannuation dependent, will impact how a beneficiary can receive the superannuation, how it will be taxed, and whether the beneficiary can even receive the gift at all.
Nominations may be binding, or non-binding, and a nomination can potentially lapse.
Lapsing of Nominations
One common concern is whether a binding nomination needs to be renewed every 3 years, and if not, whether it becomes non-binding, or completely null and void.
This may be a term of a trust deed, but it is also due to Superannuation Industry (Supervision) Regulations 1994 Reg 6.17A(7), which states that:
“Unless sooner revoked by the member, a notice…ceases to have effect:
a. at the end of the period of 3 years after the day it was first signed, or last confirmed or amended, by the member; or
b. if the governing rules of the fund fix a shorter period–at the end of that period.”
The High Court in Hill v Zuda Pty Ltd provided clarification in relation to self managed super funds, finding that 6.17A does not apply to self managed super funds. The result of this decision is that, unless the trust deed for the super fund imposes a timeframe for renewal or lapsing of a binding death nomination, a correctly made nomination will not lapse after 3 years.
For assistance with your estate planning including dealing with superannuation, contact Baker Love Lawyers on (02) 4944 3322.
