Episode 6: What happens to super when you die?

Hello and welcome to Super Insider Australian Retirement Trust's podcast series on the economy, investments, and all things to do with your superannuation.

My name is Anne Fuchs, and I am Head of Advice at Australian Retirement Trust. The team and I love helping our members, there's 2 million plus of them, make really great decisions about their retirement savings.

I'm sitting here today on Turrbal and Yuggera country, and so I'd like to pay respects to Elders past, present, and emerging.

With me is someone who's just fabulous, Ruth Weaver, so wonderful to see you.

Thank you, Anne, I'm delighted to finally be part of the Insider's Club.

I know, it's good to have you as part of the Insider's Club. We're talking today, it sounds like a bit of a morose subject, so I'm delighted that your beautiful, musical Irish lilt is going to bring some joy to what is a bit of a grim topic, which is about super and what happens when you depart. But before we do that, we have to do the general advice warning.

We do. How about I do that, Anne?

It is worth noting that everybody listening to this podcast will have a very different set of personal circumstances and definitely different financial circumstances. So please bear in mind, as we talk through this topic we are talking in very general terms, we're not taking your situation into account. If you do want to do that, pick up the Product Disclosure Statement, have a read of it, talk to your financial planner, make sure that you are seeking some kind of advice. So hop on to the website for some more information, give us a call on 13 11 84 if you're a Super Savings member, and if you're a QSuper account holder give us a call on 1300 360 750.

Also, I want you to know that when we refer to preferred beneficiary, specifically in this episode, this is an option offered for Australian Retirement Trust Super Saving's account holders and may not be offered by other super accounts or with other funds. The process for updating your beneficiaries is different with all funds, so make sure you check the details on your account and with your super fund. The examples provided today relate to Super Savings accounts only.

Yay, you. Now, Ruth, whenever you go and speak to members, you're a Member Education Officer and you've been speaking to members all around this great country for years, and they love listening to you. So again, so cool, you've got a bit of a fan club like Brian Parker. So let's start talking about what happens to super when you die. Why are we bringing such a perceived downer subject to Super Insider? Why are we doing this?

We're doing it Anne because it's really important. There are so many households out there where the only actual asset they have is their superannuation, and potentially the life insurance that might sit within that superannuation.

I say that because we're one of them. My household is like that, where the estate that I would leave to my family really consists of the house we live in, and my superannuation balance, and my life insurance. So it's really important that people are across what happens to that asset if something was to happen, and they were to pass away.

Because viewers can probably watch and we're quite expressive, Ruth, for those watching, Ruth's just removed her bracelet. She's looking fabulous in pink today.

Okay, let's start at the beginning. Because a lot of people ask, and I'm sure you've had many members ask, is there tax when you pass away? Like in your situation with your husband and your kids? Congratulations on your eldest starting high school.

Yes, I do feel about ten years older today than I did yesterday, mind you.

Yes, so what is the situation firstly, from a tax point of view?

There's a couple of rules around superannuation. Ultimately, if you're leaving your superannuation, and remember when I say superannuation, I'm also meaning any life insurance that sits in there, which often is more than the actual balance you've accumulated, so this might be a far bigger asset than you ever thought of.

For most people, if you're leaving that benefit to a spouse or a partner, very often it lands as cash in their bank account and it's tax free, and that's something a lot of people aren't aware of.

Now, it's important to think about who you're nominating, maybe get some advice on that, because there are people that you can nominate who may potentially pay tax on a death benefit. For example, an adult child. So it's just important that you don't just willy nilly put anybody down there for the sake of it, that you do give it a little bit of consideration.

What's the difference between a beneficiary and a binding beneficiary?

We get asked this a lot. A lot of people will say that they have a beneficiary in place and there are two types well, actually there are three types of beneficiaries depending on what stage of your superannuation you're at. Ultimately, the most common one we tend to see is a preferred beneficiary. Now that's great, it's better than nothing. As I often say it's better to have one of them than have nothing at all. But the preferred beneficiary, really, it should be understood that's just a preference and you're telling the super fund, Look if I pass away, this is what I would like to happen. But ultimately, I'm still allowing you to make the final decision as the superannuation fund. So if I've not put on a dependent on there who has a legal claim, I acknowledge that they may still receive some of the money. The problem with a preferred beneficiary, where you may not have factored in all dependents, if somebody does come and contest that, it might drag the claims process out.

For someone who might really need the money.

Yes, so that can make the timeline of getting that money into the bank account, a bit of an issue.

And massively stressful.

Yes, especially at a time when you're already grieving, right? So it's not what you want to be doing, when you're trying to address the loss of a loved one.

Yes. Okay, so preferred beneficiary?

That's option number one.

What we would love to see people get more involved in is putting a binding beneficiary in place. It's a legally binding agreement between yourself and your super fund that they will pay that money to the person, or the people, that you have nominated. Now, when I say legally binding people get scared and they think this is going to be a really difficult process. It's actually not, it's a really simple form. Every fund has one on their website and it's a very quick instruction as to who the super fund should pay that money to. I've got one of these on for my husband, and I can tell you it takes about five minutes to do the process.

They need to be renewed every three years.

They do they need to be renewed every three years. That can bring a bit of fear with people, too, because they often think how am I supposed to remember when that will fall off?

I've just renewed it.

I actually did my own about two months ago as well. You will be prompted so Australian Retirement Trust will tell you, roughly three months before it expires that it's about to fall off. The beauty is, if you're keeping the same beneficiary as part of your binding nomination, if you're keeping the same person on there, you can literally click a button and submit it and say, I'm not changing it, put it on for another three years. You only need to complete the paperwork again if you're changing the person. Remember, you can change it at any point, you don't have to wait for it to expire to update it.

You spoke about the complexities, at times, with people getting it that you may not want to inherit the super. There is a story of a member in regional Queensland, look, some people's lives are simple, and a lot of people's lives are complicated, families are complicated.

On my travels for Australia Retirement Trust, I've travelled the length and breadth of the country talking to all types of members and there are always stories that stick out. This one in particular always sticks out to me. It was a lady I met in regional Queensland who had recently divorced from her husband. She had two sons, two adult sons and unfortunately one of her sons was a gambling addict, so he really had struggles in life. She still had a mortgage, and her ultimate goal was if something happens, I really want to make sure there's enough money there to keep a roof over their heads.

She said, I've got two different types of sons. They couldn't be more different, polar opposites�. One was really responsible with money, really mature, and the other fella, unfortunately, was a gambling addict and couldn't keep money in his hand.

So the way around that tricky situation, what she ultimately decided to do, was to put her first son down on a binding beneficiary nomination so that he would receive 100% of the money with the understanding that he was mature enough to use that to pay off the debt for the home and then they always had a roof over their head.

And that way too the ex-husband couldn't contest it.

The ex-husband couldn't contest it, but more importantly Anne, the brother - and this is a harsh example, it sounds very mean - but she was doing this in the interest of both sons. So the second son had that been a preferred beneficiary, he had every right to contest that decision.

And he could have blown that money.

100%, yes.

I had a phone call at the start of the year, sadly from a friend of a member and this member had been in a car accident and was in a coma. They weren't sure whether she was going to come out and no one had an authority on the account. They didn't know how much life insurance she had within a super, and everyone was panicking. So it was a timely reminder for me about making sure there is somebody, I guess in that situation it would be the responsible son, who has a third-party authority that can access that information on the account in the event that you're incapacitated.

Yes, you're talking about a situation where somebody hasn't passed away, but the money is tied up and somebody might need to try and figure out what their options here are. You would be surprised how many families out there have no idea where their loved one's superannuation even is.

No I wouldn't be surprised.

I'd say if I didn't work for ART, I don't think my husband would have a clue either. But number one would be, have that conversation at home. Where's your super, is there insurance in it? What would I get if you were to pass away? Who do I ring if something happened to you? That's step one. Like you said, another option is what if you don't pass away, but you're in a situation like you mentioned, would I be able to ring and talk to the fund on your behalf?

I've got a third-party authority on my husband's account; I ring up and talk on his behalf.

That's not necessarily only because of estate planning, it's because he doesn't understand super, I do. So I ring up and ask the questions.

So you're sitting over, at dinner over your lamb cutlets and peas and potato talking about it, educating the kids?

Yes, but the third-party authority can have lots of functions, and the estate planning side of it is certainly an important element of it.

Okay, so what else do we need to think about when it comes to passing away and super?

I think ultimately the goal here is to make sure that you look at your superannuation and check if you have a beneficiary on there. I cannot tell you how many times we see people have beneficiaries on their old partners. Old partners who they're no longer even linked to.

Would they be preferred beneficiaries?

They would be preferred, and there would be the ability to contest that, but it's sloppy. It's sloppy administration on what might be your biggest asset to pass on to your loved ones.

Because if you own a home, probably you have a folder at home where you've got the deed of the house. Maybe in that folder where you might, if you've got an up-to-date Will, then also have your superannuation account in there as well.

Absolutely, and the other thing is super is not something everybody's thinking about on a day-to-day basis.

Why not?

It's not tangible, is it? You can't spend it until you're at retirement, and it's tomorrow's problem. But tomorrow always comes eventually, and you do need to eventually spend it, so you need to tap into it. Most people, it's their biggest asset, right? I mean, biggest amount of money. It's certainly my biggest asset.

I've got three teenagers, two of them got their first Australian Retirement Trust accounts working at Merlo coffee, as baristas. But I've said download the app, and, because kids are into Bitcoin, I feel like they're a bit more financially savvy this generation.

Yes, they are, 100%. I know I look way too young to say this, but I've worked in superannuation for well over 15 years now, and I am seeing a shift. I am seeing this new generation come through where they do want to learn a little bit about super. I think we are improving with engagement levels, and we are improving with people wanting to look at this.

I think it's really important, the estate planning side of superannuation, because it is different, it's different to other assets.

And regardless of what age, because that member I was referencing who thankfully is on the road to recovery, was a young person. So if you know whether you're 17, 37, 77.

Anne, the thing with young people, the trap they fall into is they say, "It doesn't really matter, I have hardly any super," but very often the young people have quite a lot of life insurance, so the actual payout can be a lot larger than you might think.

Yes, hundreds of thousands of dollars.

Oh yes, 100%.

Well, any final messages, Ruth?

A couple, number one it's really easy to put a beneficiary in place.

Do you call the Contact Centre? What should you do?

You can, you can call the Contact Centre if you want a little bit more guidance on understanding the different options.

If you want to put a preferred in place for the moment, rather than having nothing then hop on to your mobile app or hop online and just put it in. You can do it through your online access. If you do have somebody that is a dependent - so remember, when it comes to the binding beneficiaries you do have to nominate somebody who is a dependent, so that's a spouse or a partner, a child. Someone that's in an interdependent financial relationship is the terminology we use. So someone that you can put on the binding beneficiary. Print the form out, sign it in the witness of two people who can witness your signature.

Yes, it doesn't need to be a JP.

It does not need to be a JP. But it cannot be the person you've nominated. That does look a bit dodgy.

Could it be another family member?

Yes, it can, as long as they're not the beneficiary themselves, they can be the witness. Generally I find if you're working, people tend to ask their work colleagues.

Yes, I think that's exactly what I did.

Yes, so you can jump online, download the form, and then submit it back online as well. It's a really, simple thing to do.

So downloading the app, the ART app.

My final comments were there's a quote from Eleanor Roosevelt, I love it, and I remind myself of this. One of the great quotes that came from her was, it takes as much energy to wish, than it does to plan. So sitting there, thinking, and hoping that your money will end up in the right hands, at the right time and waking up at 3am and having that fleeting thought, that takes energy. It's a lot easier to just put the binding beneficiary in place and not have that worry. This worry you have has a solution. So clear up your headspace for other problems and get this one addressed.

Yes, a really simple one. It's the start of the year of 2023, people are thinking about eating well, losing weight, doing more exercise having more work life balance all that stuff. Some

of those I might be having less or more success with. But this is something just in terms of family admin, personal admin, just do it.

Yes, just do it. It takes way more energy to worry about it than it does to solve it.

Okay, well, that wasn't a depressing episode at all. Thanks so much for being on Super Insider.

Thank you to our viewers, we hope this has been useful. As Ruth said, don't waste a minute. Don't wish, just get on with it and plan. Like us on your streaming service, Spotify, eventually I'll get all of those right, again showing my age.

I bet your teenage kids could.

They absolutely could, and we look forward to you joining us again soon on Super Insider.

This podcast is general information only and brought to you by Australian Retirement Trust Pty Ltd (ABN 88 010 720 840, AFSL No. 228975) as trustee for Australian Retirement Trust (ABN 60 905 115 063) (the Fund).