WARNING-Don’t let this happen to your family!
John and Robin are married in their 40’s and have 2 young children Ben and Stephanie.
John has been a member of a Retail Super Fund for many years , in fact before Ben was born and has not reviewed his super death benefit nomination of beneficiary since then.
John and Robin’s mortgage is around $500,000 and they have very old wills.
John is on his way to work and has a fatal car accident leaving behind his distraught wife and children.
Luckily John had $1,000,000 Term Life insurance in his super fund.
This situation could have had an outcome giving Robin the opportunity to pay out the mortgage and invest $500,000 so she had the option of looking after the children if she chose to continue to stay at home.
Instead, the outcome was devastating for Robin because she had no choice but to go back to work as Robin was left with a mortgage just short of $170,000 to repay.
How did this happen-could it happen to your family?
All it took was John not knowing the difference between a Death Benefit Nomination of Beneficiary Form and a Binding Death Nomination.
John, like many other people who are members of a super fund, thought that upon premature death his super fund account (including term life insurance) would simply be paid as a cheque to his spouse - Robin.
Not so.
Because John signed a Death Benefit Nomination of Beneficiary Form he passed the decision of who gets his super death benefit to the Trustee of his Retail Super Fund, who has the following discretion when it comes to paying the fund’s death benefits;
- Deciding: Who are John’s beneficiaries (dependants), and
- Deciding: The form of the benefit, a lump sum of a pension, and
- Deciding: What proportion of the total death benefit will be paid to each dependant
Here is what the Trustee decided:
- Dependants: Robin, Ben and Stephanie (not Robin alone as was John’s original intention when he filled out the Nomination Form giving 100% of his super death benefit entitlement to Robin)
- Form: Robin would receive a lump sum and the 2 minor children would be paid a pension
- Proportion: Robin and the children would be treated equally and be entitled to $333,333
As a result of the Trustee decision:
- Robin did not have a sufficient lump sum to pay off the mortgage and enjoy the financial freedom of being debt free
- Robin did not have a $500,000 lump sum to provide income for the family so Robin could possibly stay at home full time or work part time if she chose
- The children receive a most pension which helps a little
This outcome could have been completely avoided if John had simply completed a Binding Death Nomination Form nominating Robin to receive 100% of his entitlement.
Don’t get caught-please seek advice about what is best for you and ensure you really know what would happen to your super money and insurance if you died
Don’t be like John and leave it to someone else, you decide.
For more information, please contact Azure Group Wealth at ourteam@azuregroup.com.au or (02) 9238 1188.
DISCLAIMER/WARNING – GENERAL ADVICE ONLY
The information provided in this article is General Information only, so does NOT take into account your objectives, financial situation and needs.
Before acting on any information contained in this website you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs.
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