Monday, October 19, 2009

Take a conservative view on death

Lisa Galbraith, CEO

What happens to your superannuation funds on death continues to cause confusion and complaints for trustees and members. I noticed recently that the Superannuation Complaints Tribunal chairman Jocelyn Furlan says about 25 per cent of complaints relate to distribution of death benefits.

The confusion exists around death benefits because the law is not clear. The law is inconsistent. Not the first or last time that the law will be inconsistent. So, if it is inconsistent and unclear why not take a low risk path? Why take an approach that may result in the wrong people getting your money?

The heart of the issue is how long a binding death benefit nomination form is valid. Does a binding death benefit nomination form last for a maximum of 3 years or forever? Rather than join the debate, surely it is simpler:

  • to review your death arrangements every 3 years and then update your forms; or
  • to consider using a death benefit agreement which does not have the same lapsing issues.
I think it is also important to remember that your personal circumstances will change as you age and as your beneficiaries age. What makes sense at 40 won’t necessarily make sense at 55. The taxation arrangements may also change over the life of your superannuation.

Why join the debate? You spend a lot of time managing your investments, selecting the financial approach for your superannuation fund and tracking its performance. Reviewing your financial arrangements on your death also need regular review and discussion. Make sure it still works.

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