We often say to our clients that when getting advice about things like estate planning the advice should be three-fold – that is they should see their lawyer, accountant and financial planner.
One of the most commonly misunderstood assets a person has is superannuation.
Superannuation is essentially money held by someone else on trust for you. This means that you do not have direct control over your superannuation and cannot access it at a whim. It is designed to provide you with money to live off in your retirement.
There are 3 main trigger points that will enable access to superannuation:
- Retirement (note there are specific age requirements in this regard);
- Total or permanent disability including terminal diseases in some cases;
- Death.
In relation to the third point it is important to remember that your Will does not dictate what happens to any superannuation you have when you die. This must be controlled outside your Will by making a “nomination” directly with your superannuation fund. Your lawyer or financial planner should be able to assist you with this.
Your superannuation is typically made up of two components:
- The money you and your employer have contributed and accrued over your working life;
- Any insurance component that might be included in your fund.
What you also may not know is that you may be able to obtain income protection, total or permanent disability insurance and life insurance within your superannuation fund. This means that you do not need to pay for it out of your own pocket from the income on which you live but rather it can be paid from within your super fund.
Here are three tips we recommend to make sure that your superannuation is working for you:
- Consult your lawyer about how you can make sure your superannuation ends up with the right people when you die and include this in your estate planning process;
- Consult your financial planner about how you can combine multiple superannuation funds into one and potentially fund insurance from within the fund.
- Talk to your accountant about the taxation treatment of superannuation to make sure that you are maximising your returns.
Superannuation is a tricky beast. Most of us know that it is a fund for our future but few of us know the intricate details about how it all works. Doing some planning early means that you will avoid some potential traps such as paying too much tax, being inadequately insured or having your superannuation end up in the wrong hands down the track.
