Your Will Does Not Cover Your Super: Estate Planning in Your 20s and 30s

Here is something that surprises most people the first time they hear it. If you die, your superannuation does not automatically go to whoever is named in your will.

Super sits outside your estate. Your will governs your estate. So unless you have specifically connected the two, your will may have no say over what is often the largest single asset a person in their twenties or thirties owns, particularly once insurance inside super is counted.

This is not a reason to panic. It is a reason to spend twenty minutes on it.

Who can actually receive your Super?

The law limits who a fund can pay a death benefit to. Broadly, that is your spouse or partner, your children of any age, someone in an interdependency relationship with you, someone financially dependent on you, or your legal personal representative, which means your estate.

That last one is the bridge. Nominating your legal personal representative is how you direct your super into your estate so that your will can distribute it.

Binding, non-binding and nothing at all

Your fund will let you make a nomination, and the type matters.

• A binding nomination means the fund must pay your benefit to the eligible person you named. Some binding nominations lapse after a few years and need renewing, and some do not.

• A non-binding nomination tells the trustee what you would prefer. It is guidance, not an instruction. The trustee can decide differently.

• No nomination at all leaves it entirely to the fund to work out who should receive it. That process takes time, and the outcome may not match what you would have chosen.

For someone with a partner, a blended family, an ex, or parents they would want looked after, the difference between these three options is not academic.

The insurance question

Most people with super also have some life or total and permanent disability cover attached to it, often without having thought about it. That payout follows the same rules as the rest of your super. So the nomination question is usually about a much larger sum than your balance alone suggests.

The four checks

1. Find every super account you have. Old jobs create old accounts, and old accounts have their own nominations.

2. Check what nomination is on each one, and whether it is binding, non-binding or missing entirely.

3. If it is a lapsing binding nomination, diarise the renewal date. An expired nomination is treated as no nomination.

4. Look at whether you have a will, and whether it still reflects your life. A will written before a partner, a property or a child is a will that no longer does its job.

The part people avoid

Estate planning feels like a task for later life, which is precisely why so many people in their twenties and thirties have nothing in place. But the situations where it matters most are the ones nobody plans for, and they are not age-dependent.

It is also less work than it sounds. Nominations are usually a form with your super fund. A straightforward will is a conversation with a solicitor. Neither takes long, and both remove a problem your family would otherwise have to solve at the worst possible time.

What to do next

Start with your Super nominations, because you can usually do those yourself this week. Then have the conversation about the rest of it.

Wills, powers of attorney and estate documents are legal work, so a solicitor drafts them. What we can do is help you see how your super, your insurance and your estate fit together, so that what you sign actually reflects what you want to happen.

This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal advice. Before acting on anything in it, consider whether it is appropriate for your circumstances and seek advice that takes your situation into account. Where a scheme, rule or threshold is mentioned, check the current position at ato.gov.au or moneysmart.gov.au.