Introduction
If you separate from your spouse or partner, you should take steps to ensure that your superannuation will be paid in accordance with your wishes, on your death.
In this article we use the following terms to describe a partner:
- Spouse: this is a person to whom you are legally married.
- De facto partner: Generally speaking, this means a partner to whom you are not married, but you live together as a couple on a genuine domestic basis.
It is possible that your partner could meet the legal definition of a de facto partner, even if you live in separate residences. This is a complex area of law, and specific legal advice should besought.
What happens to my superannuation on my death?
Superannuation is a unique asset which does not automatically pass according to your Will.
Rather, on your death, your superannuation (including any life insurance held through your superannuation fund) will be paid either:
- in accordance with any valid Binding Death Benefit Nomination (“BDBN”) which you have made with your fund; or
- If you do not have a BDBN in place, then as the superannuation fund determines.
These two scenarios are discussed further below.
What is a BDBN?
If you have a valid BDBN in place at the date of your death, then the superannuation fund must pay your superannuation to the person(s) nominated in your BDBN.
For public superannuation funds (eg CBUS, Australian Super, HESTA, etc), a BDBN is a written form in which you nominate your chosen beneficiaries to receive your superannuation on your death. The form must be signed and dated by you in the presence of two witnesses. Your superannuation fund can provide you with the correct BDBN form. Once complete, you must return the BDBN form to your fund.
If you are a member of a Self-Managed Superannuation Fund(“SMSF”), then the rules of your particular SMSF will specify the process to make a BDBN.
A BDBN may lapse after a certain period of time (typically three years), and should therefore be regularly reviewed and updated, if required.
In your BDBN, you can only nominate a person who is considered a ‘dependant’ under superannuation law. A person is considered to be a dependant if, at the time of your death, they were:
- Your spouse or de facto partner;
- Your child (including an adult child);
- In an ‘interdependency relationship’ with you (generally speaking, someone with whom you lived and shared a close personal relationship, which involved the provision of financial and domestic support).
A step-child is also considered to be a dependant, unless excluded by the superannuation fund rules.
Alternatively, you can nominate your ‘Legal Personal Representative’ as your beneficiary. This will have the effect of directing your superannuation into your estate on your death, which will then be paid:
- in accordance with your Will; or
- in accordance with the laws of intestacy, if you do not have a Will. (See our article My Loved one has died without a Will. What should I do?)
If you wish for your superannuation to be paid to your estate, then it is essential that you use the correct terminology in the BDBN, as required by the superannuation fund rules. Generally speaking, you must state ‘Legal Personal Representative’. Nominating your ‘estate’ or your ‘executor’ is unlikely to be compliant with the fund rules, and may invalidate your BDBN.
It is also important to note that the rules of your specific superannuation fund may place further restrictions on whom you can nominate as a beneficiary.
If you nominate a beneficiary in your BDBN that is not an eligible person according to law or the rules of the superannuation fund, then that nomination will be void, and perhaps the entire BDBN could be invalid.
What happens if I separate from my partner?
A BDBN will not be automatically revoked upon separation, unless the rules of the fund specifically state this.
If you have separated from your spouse, but not yet divorced, then your former spouse is still considered your legal spouse, and may still receive your superannuation under an existing BDBN.
What happens if I do not have a BDBN in place?
If you have do have a valid BDBN in place at the date of your death, then your superannuation fund will have discretion as to whom to pay your superannuation to. However, your fund can only pay your superannuation to a dependant, or to your Legal Personal Representative, as outlined above.
Some superannuation funds also allow you to make a ‘Non-Binding Death Benefit Nomination’. As the name suggests, this type of nomination is not binding on the superannuation fund. On your death, the fund will consider the Non-Binding Death Benefit Nomination, but may choose to not follow it.
If you have separated from your spouse, but not yet divorced, then your former spouse is still considered your legal spouse, and the fund may decide to pay the superannuation to this former spouse on your death.
If your loved ones are not happy with the decision made by the superannuation fund regarding who your superannuation is paid to, then an appeal can be made to the Australian Financial Complaints Authority, to review the decision. Strict time limits apply for the appeal.
Control of your SMSF
If you are a member of an SMSF, then, in accordance with superannuation law, you will also be a controller of this SMSF. This will either be as an individual trustee of the SMSF, or as a director of the corporate trustee.
If your spouse or partner is a co-controller with you, then, on your death, your spouse/partner may be the only surviving controller. Your spouse or partner would therefore have complete control over the SMSF.
Even if your domestic partner/spouse is not a member of your SMSF, the law states that on your death, the executor in your Will (or the administrator of your estate, if you have no Will) can replace you as the controller on your death. If your domestic partner/spouse is the executor in your Will, or if you have no Will, then on your death your spouse or domestic partner may have the power to appoint themselves as controller of your SMSF, which may not be in accordance with your wishes.
You can ensure that your chosen person is appointed to replace you as the controller of your SMSF, by ensuring that you have a current Will in place, and by ensuring that you have taken any other necessary steps required by the rules of your SMSF.
Other steps to take if you separate from your Partner
If you separate from your partner, you should also consider:
- Reviewing your Will (Read our article Have you recently separated? Do you need to update your Will?)
- Reviewing the ownership of any real estate with your partner (Read our article Safeguarding your property following a separation).
Conclusion
If you separate from your spouse or domestic partner, it is critically important that you review any BDBN which you have in place with your superannuation fund, and the succession of control for your SMSF (if applicable). A failure to do so could mean that your former spouse or partner receives some or all of your superannuation, which may not be in accordance with your wishes.
How Sharrock Pitman Legal can assist
We have an Accredited Specialist in Wills & Estates Law, and our lawyers can provide advice on options available to safeguard your assets after separation. Please do not hesitate to contact us on 1300 205 506 or email sp@sharrockpitman.com.au.
Related articles
What impact does marriage have on my existing Will?
Superannuation Death Benefits: Avoiding Disputes
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
Liability limited by a scheme approved under Professional Standards Legislation
Binay Prasad is a Senior Associate of Sharrock Pitman Legal and an Accredited Specialist in Wills and Estates law.
Binay has over 10 years of experience in the field of wills and estates and has a particular interest in complex estates involving business, family trusts, and SMSFs. Binay also has experience in family law, which complements his wills and estates practice. For further information, contact Binay on his direct line (03) 8561 3329 or by email, binay@sharrockpitman.com.au.
