Superannuation is a generic term used to describe Australia's compulsory retirement savings scheme. Superannuation Funds are special trusts created with the exclusive purpose of providing retirement income and benefits for the members of that trust or fund. Like all trusts, Superannuation Funds are administered by trustees and their operations are regulated by rules which must comply with strict legislative restrictions. Rules vary depending on the type of Fund.
Entitlements under a Superannuation Fund occur either upon death of a member or upon a member attaining a regulated age. Payments from Superannuation Funds are highly regulated and very tax sensitive. The trustee of the Fund must pay Fund benefits in accordance with the Fund Rules but commonly has absolute discretion to decide how they are distributed where there are two or more potential beneficiaries. The trustee may take heed of a request from the member either by Will or otherwise that the Fund be distributed in a particular manner but is under no obligation to do so unless the trust allows for specific nominations and the member has nominated a particular beneficiary.
Until 30 June 2004, Superannuation Fund trustees were obliged to distribute entitlements to either the member's legal representation and/or the member's dependents. Dependents as previously defined to include the deceased's spouse, ex-spouse and dependent children but under the new definition an independency relationship between two people exists if:
- They have a close personal relationship;
- They live together;
- One or each of them provides the other with financial support; and
- One or each of them provides the other with domestic support and personal care.
This amended definition extends the range of persons capable of claiming an interest in a Superannuation Fund to same sex partners, family members who live together, and an adult child caring for an elderly parent.
In any Estate Plan, it is advisable to ensure that:
- the superannuation trustee is willing to pay the deceased member's superannuation entitlement to the member's estate if requested to do so by the estate executor;
- the beneficiary or beneficiaries to whom your superannuation payment can be paid via your Will qualify as dependants to enable the payment to be received as a Tax Free distribution;
- the wishes of the member are made known to the superannuation trustee;
- adequate provision for all dependants is made to enable the superannuation trustee to feel comfortable about distributing the Superannuation Fund benefit in accordance with the request made; and
- If the Superannuation Fund allows you to nominate your beneficiary, that you make that nomination.
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