Making or Updating a Will and Superannuation – Expatriate Issues
Commencing an overseas assignment is one of those occasions, just like marriage and the birth of children, when you should review your current will, or initiate the making of a will if you do not already have one. The penalty for not doing so is the prospect of having your estate (very slowly) distributed under often strict and inflexible statutory guidelines that may be contrary to your own preferences and incur taxes at a higher than necessary rate.
Some issues to consider when making or updating a will:
The need for professional advice is accentuated by the fact that a surprisingly high percentage of Australian wills are contested, mainly under "family provision legislation" - state laws which enable a spouse, child or dependent to contest a will on the basis that adequate provision has not been made for them. Again, research suggests that a high percentage of these are successful, with courts apparently very willing to vary allocations made in a will. Particularly if your estate is large or there are complicated circumstances, which is typically the case for expats, then advice from a lawyer who specialises in estates and successions will be necessary.
Superannuation - Nominating Beneficiaries
It is important to remember that superannuation is not a matter automatically dealt with in your will. In the absence of you telling the trustees of your superannuation fund who should receive your superannuation benefits it is the trustees of the fund who will determine who should receive the benefits.
In summary, it is the right and obligation of the trustees to distribute your benefits among your dependents and your estate in whatever fashion they believe is fair and reasonable unless you have put in place a "binding nomination". Such a nomination removes any uncertainty in terms of who receives the funds on your death and provide you with clarity in terms of estate planning.
Who can you nominate?
• Your spouse – they can be your legal spouse or de facto, who lives with you on a genuine domestic basis.
• Your children of any age – they can be step-children, adopted or "ex-nuptial".
• The executor of your will or administrator of your estate – also called your legal personal representative.
• Anyone with whom you share an “interdependency relationship”.
In terms of what constitutes an interdependency relationship, it is defined as a relationship between two people who have:
- a close personal relationship; and
- live together; and
- 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.
An interdependency relationship can also exist where a close personal relationship exists between the two persons but because of a physical, intellectual or psychiatric disability, one or more of the other conditions are not met.
You can split the benefit between two or more people as long as you give details of those dependents and the proportional share they should each receive.
Note that only the nominees who are dependent at the time of your death can receive your super, If you don't have any qualifying dependents then you should nominate your legal personal representative or the executor of your will. If the trustees of the superannuation fund confirm that there are no other dependents, then the funds will be almost certainly distributed to your estate..
Note that binding nominations are typically only valid for a period of three years, and your super fund should advise you when your current nomination is about to expire. You can revoke or alter your nomination at any time by sending your super fund a new binding nomination – which needs to be witnessed by two independent individuals. It's important to note that if your nomination expires and you fail to renew it, your benefits will then be paid to your estate. Once you've made a binding nomination your superannuation is not, in the future, payable at the entire discretion of the trustee.
Bear in mind that you can also have a non-binding nomination, the effect of which is to merely inform the super fund trustees of your preferred beneficiaries. In this situation, the trustees retain the discretion to make the final decision with respect to any distribution.
Finally, we suggest that prior legal and/or tax advice is sought in terms of making any binding nomination, particularly in complicated circumstances. Remember that leaving superannuation money to someone who is considered a non-dependent under tax law can attract tax of up to 32%.