Is super part of my estate? In most cases, no. Your superannuation is held by the trustee of your super fund, and it is usually paid out under the fund’s rules rather than under your will.
The same can apply to a family trust or a family company. The assets may feel like yours, but legally they may not be yours to leave. This article explains what happens to super when you die, how family trusts and company shares pass, and why some of these assets can still be drawn into a family provision claim in NSW.
Super does not automatically form part of your estate. When you die, the trustee of your fund decides who receives your super death benefit, following the fund’s rules and superannuation law. Your will only controls your super if the money is first paid to your estate.
Under superannuation law, your fund can generally pay your death benefit to:
This means you generally cannot direct your super straight to someone outside these categories, such as a friend or a charity. If that is what you want, one option is to have your super paid to your estate and then deal with it in your will.
A binding death benefit nomination tells your fund who must receive your super. If it is valid, the trustee has to follow it. A non-binding nomination is only a guide, and the trustee can still decide who receives the money.
Some binding nominations lapse, commonly after three years, unless you renew them. Others are non-lapsing. Not every fund offers every type, and the rules differ between funds. A binding nomination that is no longer valid is normally treated like a non-binding one.
If you have not made a nomination, or your binding nomination has lapsed or is invalid, your fund’s trustee decides who receives your super. The trustee may choose between your dependants or pay it to your estate. The result may not match what you would have chosen, or what your will says.
It is worth checking your nominations whenever your circumstances change, such as a new relationship, the birth of a child or the death of a beneficiary, and reading them alongside your will.
If you run a business or hold investments through a family (discretionary) trust, the trust assets are not legally yours. The trustee holds legal title to the trust property for the benefit of the beneficiaries. Because those assets are not part of your estate, your will cannot give them away.
What can pass is control. Control of a family trust usually sits with the trustee and with the appointor, the person who can remove and appoint the trustee. How those roles pass when you die depends on the trust deed. Some deeds allow the appointor role to be dealt with in your will or a separate document, while others set their own rules. Reading the deed and your will together is the best way to avoid an unexpected result.
A family trust is different from a testamentary trust, which is created through your will and comes into effect after your death.
A company is a separate legal entity. Its business and the money it earns belong to the company, not to you, even if you are the only shareholder. What you own are your shares, and your shares do form part of your estate.
After your death, your executor deals with your shares. Usually the executor is first recorded as entitled to them, and the shares are then transferred to your beneficiaries. The company’s constitution or a shareholders agreement may affect this. For example, it may give other shareholders the first right to buy your shares, or give the directors a discretion to refuse a transfer.
Good estate planning for business owners means your will, your company documents and any agreements with co-owners all point the same way. It also helps to plan who will run the business day to day if something happens to you.
In some circumstances, yes. NSW has “notional estate” laws that apply to family provision claims, where an eligible person asks the court for provision from a deceased estate. If the estate itself is not enough, the court may treat certain property outside the estate as if it were part of it.
Depending on the circumstances, this may include super paid directly to a nominated beneficiary, assets held in a family trust, or property given away in the three years before death. The court must weigh a number of matters before making such an order, so the outcome is never automatic. If you are thinking about a claim, see our page on contesting a will.
This is one reason an estate plan that moves assets outside your estate should be made with a possible family provision claim in mind.
We help individuals and business owners make sure their will, super nominations and trust and company arrangements work together. To talk about your estate planning, book a free consultation with our team.
