A financial advisor is essential for estate planning

Estate planning can often be overlooked when people think about starting or refreshing their financial plans; however, it is a critically important element of a wealth strategy.

Many people think of estate planning as simply writing a will; however, it involves layers of complexity that you should be aware of. Laws governing superannuation, taxation, and inheritance can make understanding the process challenging without professional guidance.

In this article, we’ll explore why a financial advisor is crucial for estate planning, the unique role of superannuation in inheritance, and how Binding Death Benefit Nominations (BDBNs) help ensure your super is distributed according to your wishes.

Our role as financial planners is multi-functional. As discussed in last month’s article, we focus on an overall strategy encompassing the current and future. In estate planning, we are there to help you decide much more than just who gets what. We take a holistic approach to advice, helping you identify what you want to achieve with your estate. This varies greatly between clients, and a cookie-cutter one-size-fits-all approach rarely works out. Whether your estate is set up to provide for your family, support a charity, or ensure a smooth wealth transition, a financial planner must ensure the estate minimises its tax implications, coordinates structures, and protects vulnerable beneficiaries.

A common misconception is that superannuation automatically forms part of your estate and is distributed under your will, which is the case for most other asset classes, such as property or cash.

It is essential to understand that superannuation is held in trust by your super fund trustee, which means it does not automatically pass under the terms of your will. The super fund trustee decides who receives your super death benefits, taking into account:

• The rules of the super fund.
• The law governing superannuation.
• Any nominations you have made.

This creates a different dynamic from traditional assets like real estate or bank accounts. While those generally fall into your estate and are managed by your executor, superannuation requires specific planning to ensure it ends up with whom you intended.

A binding death benefit nomination (BDBN) is a critical tool for controlling what happens to your super after you pass away.

A BDBN is a legally binding direction you give to your super fund trustee, instructing them on who should receive your superannuation death benefits. The trustee must follow it if it is valid and up to date. A BDBN ensures your super goes directly to your nominated beneficiaries, bypassing disputes or delays. Death benefits can be paid directly to beneficiaries, and you can nominate dependants such as a spouse, children, or financial dependants.

However, BDBNs must be correctly prepared and renewed, often every three years unless your fund allows non-lapsing nominations. An out-of-date or invalid nomination can result in the trustee exercising discretion, potentially directing your super to someone you did not intend.

Estate planning laws, superannuation, and tax intersect in a complex knot. Professional and tailored advice is highly recommended to ensure you don’t leave your family or the intended recipients of your estate with legal or financial burdens. With our help, we can ensure your will and estate plan works hand-in-hand with your superannuation arrangements, your BDBNs are valid and strategically aligned with your broader estate plan, and your tax outcomes are optmised to reduce the risk of significant tax obligations for your beneficiaries.

Estate planning is not solely about passing on assets. It is a focused strategy that protects loved ones and ensures the honouring of your legacy and wishes.

Step Up Financial Group, now AFPG, has the expertise to guide you with professional, tailored estate planning strategies. It may be the best thing you can do for your loved ones.

Contact us today for experienced, compassionate, and professional estate planning advice.