Last updated: July 2020

4. Financial Planning

Did you know that your superannuation and life insurance benefit won’t automatically form part of your estate?

Everyone manages their day-to-day finances but planning ahead often didn’t seem that important. These days, retirement on average lasts more than 17 years, which is about 40% of our adult working lives. We think it’s important to have a plan.

 

Read more about the following Financial Planning topics:

4.1. Considerations & Inclusions of a Financial Plan

4.2. Review Your Superannuation – to benefit you and your family now

4.3. Funeral Preparation & Payment – so your family isn’t left with a large out-of-pocket expense

4.1. Considerations & Inclusions of a Financial Plan

Before making any plan, you will need to think about your objective. For this, your financial plan should consider a number of future scenarios and include consideration about having enough funds or assets to:

  • afford your current or acceptable lifestyle for a long time;
  • pay an aged care bond;
  • pay aged care services;
  • pay for medical treatments;
  • not leave your family with bills to pay after your death; and
  • leave a legacy behind for your children and grandchildren.

You can achieve this by creating a financial plan that takes into considerations a range of financial tools including:

  • Superannuation
  • Funeral Pre-Arrangements & Insurance
  • Life Insurance
  • Family Trusts
  • Estate Tax

You should discuss your plan with a Financial Planner to understand how you can best achieve your objectives.

4.2. Review Your Superannuation

Anyone who has worked in Australia over the past 30 years will have one or more superannuation accounts. For many the superannuation balance will be the second largest asset after the family home.

 

Nominate a Binding Beneficiary

Most superannuation funds hold your pension money in trust, meaning it doesn’t belong to you in the same way your family home does. This means that the superannuation funds have a certain level of discretion about where your balance, also known as a death benefit, will be paid to after you pass away.

 

To make sure your death benefit is paid to the person you like and not leave it up to chance, you can nominate a beneficiary. A number of different nominations exist:

  • Non-Binding Beneficiary;
  • Lapsing Binding Beneficiary; and
  • Non-lapsing Binding Beneficiary (RECOMMENDED).

Non-Binding Beneficiary

This type of nomination is the simplest that most funds these days allow you to do on your online account or over the phone. However, this type of nomination is not binding, meaning that the fund can still decide to whom the payment will be made.

 

Lapsing Binding Beneficiary

This type of nomination is a binding nomination of an eligible person. You must make this nomination using the official form of your fund(s) or a letter drafted by a lawyer to ensure it is valid and binding on the fund. The nomination will be paper-based and include your signature. Lapsing means, that the nomination is only valid for a specified period, after which it will not be valid anymore.

 

Non-Lapsing Binding Beneficiary (RECOMMENDED)

This type of nomination is a binding nomination of an eligible person for ever or until you revoke the nomination. You must make this nomination using the official form of your fund(s) or a letter drafted by a lawyer to ensure it is valid and binding on the fund. The nomination will be paper-based and include your signature. Non-lapsing means, that the nomination is valid forever or until you revoke or cancel the nomination. This is the best option to make sure your death benefit is paid to the person of your choice.

 

Eligible Nominees

A death benefit is mostly paid to dependents directly or a legal representative to form part of the estate.

Dependants are defined as:

  • The spouse or de facto partner of the deceased person (including same-sex partners);
  • The children of the deceased person (including a stepchild, adopted child and a child born after the death);
  • People with whom the deceased person had an interdependency relationship (lived together and provided financial, domestic or care support to each other); and
  • People who depend on the deceased person financially (relying on the deceased person for bill, rent or maintenance payments or having shared financial commitments like a mortgage).

Account Consolidation

36% of Australians have more than one superannuation account. This generally happens when jobs are changed, and a new account is opened. Having multiple superannuation accounts is detrimental to growing a higher balance due to some or all of the following:

  • account and/or administration fees paid for each account reduce your balance;
  • inbuilt insurance product premiums and fees for each account reduce your balance; and
  • greater effort to manage your investment strategy across multiple accounts may hinder you from making the best choices, depending on your risk appetite, investment horizon and if you are still contributing or drawing a pension.

Find out how many superannuation accounts you have

First you will need to confirm if you have more than one superannuation account. You can find this out by checking:

  • your myGov account under the Australian Taxation Office (ATO) section
  • superannuation statements from multiple funds you may have received in the post or via email
  • historic payslips to see where superannuation payments were made to
  • with your previous employers who their default superannuation fund is

Consolidate superannuation accounts

Once you know you have more than one superannuation account, you can consolidate them. If you only have one account, congratulations on keeping your super tidy.

 

To consolidate your accounts, you can:

  • determine which fund is best for you depending on fees, historic investment returns, insurance products and other factors important to you (compare funds here);
  • check if any of your funds have an exit fee or any other restrictions before you leave them;
  • submit a request to roll-over your fund to another fund using the Rollover initiation request to transfer whole balance of superannuation benefits between funds;
  • Review or set-up your investment strategy depending on your risk appetite, investment horizon and if you are still contributing or drawing a pension; and
  • Set-up your in-built insurances to the levels you need.

4.3. Funeral Preparation & Payment

In Australia funerals cost between $5,000 and $15,000. This can be a lot of money you’re your family may need to pay immediately after you pass away. The worst part is they may need to wait a while to be reimbursed from your bank account or your estate.

 

We highly recommend thinking about your funeral wishes (as outlined in Critical Information & Wishes) and make some financial arrangements. This will make it easier for your family in the immediate days after their loss, which are often the most emotional, reduce the number of decisions they need to make and know that it was already paid for.

 

You can either:

  • organise a pre-arranged funeral with a Funeral Home of your choice;
  • organise and pre-pay a funeral with a Funeral Home of your choice; or
  • take out funeral insurance.