A few key notes about the theory behind the split of super are as follows:

  1. Unfortunately it’s not a set and forget strategy; it is something that clients should consider if the percentage split is still the right thing for each year;

  2. For my clients who are in a married or defacto couple (and not in pension / retirement phase) the options are:

    1. 100% to the spouse;

    2. 100% to children or mix of children and spouse (although we don’t really consider this where the children are of the same relationship and under 18, it’s better off in the TT);

    3. 100% to the estate (on the form “LPR”) which in your case would go into a Super Proceeds Trust “SPT” (a sub-trust of your TT).

    4. A mix of the above.  For example if I had $250,000 member balance and $750,000 of death cover in my Australian Super account these will both be combined for the purposes of the Binding Death Benefit Nomination. And I would maybe decide with my husband that he gets 25% personally ($250,000) and 75% to the estate ($750,000) to go into the Super Proceeds Trust where he can still use it but it will have the asset protection of being in the trust environment.

  3. What this amount and % split should be is different for every client, and every client needs legal advice to settle the strategy.  I can’t really comment each year for clients on what the split should be without being engaged to give advice as I would need to check what else is coming into the estate the surrounding circumstances before making an appropriate recommendation of the strategies for clients to decide.  But I can give general advice which I will do now next.

  4. Using my example above the 25% to my husband was based on what we think he would need access to as quickly as possible after the death of their spouse.  So if you have $250,000 super balance with $750,000 insurance also in the super fund this means the one BDBN will cover both amounts of money.  So we are doing a BDBN for $1,000,000 payout.  So that means $250,000 would go to the survivor and the remainder ($750,000) into the “SPT” so that it can have the same tax-free treatment as if you had paid each other directly, but with the added asset protection of the SPT.

  5. We might arrive at that $250,000 figure by estimating what our family’s expenses might be in the first year after death: paying the mortgage, time off work to support the kids, school fees, and a buffer in case the estate wasn’t opened for a while.

  6. For some clients they only have super member balance and no insurance inside super so they might do 100% of super to the surviving spouse.  Or if their life insurance policy inside super is small, say $200,000 member balance and $200,000 death cover a % split of 50% spouse and 50% LPR may be more appropriate.

  7. So even though in my example I did 25% to my husband, in 5 years time if my member balance has grown to say $400,000 and insurance remained at $750,000 I may reevaluate and do 20% to spouse ($230,000 ) and 80% to the estate.

  8. I hope that makes sense to explain what we were aiming for in the split and why it is a dynamic decision I hope clients keep engaged in between our appointments.

  9. If you would like individual advice clients can request an additional paid meeting to discuss, and it likely 20 minutes would be sufficient to discuss and make a recommendation to you.