A surviving spouse wishing to nominate their super to go to a charitable cause needs to follow a few key steps to ensure it is done correctly – and without animosity from other beneficiaries.
In the first instance, it is usually preferable for a spouse to nominate their partner as their super beneficiary. That is because, as a super dependant, the monies can stay within the super environment and be paid as an income stream with no tax paid on that money. However, should one pass away and their spouse wants their super monies to go to a charity, it is important to note that they cannot directly nominate a charity as their super beneficiary on the super death benefit nomination form. Otherwise, it will not be valid because a charity is not a super dependant.
While most surviving spouses have the best of intentions, these are futile if the documentation is executed incorrectly. The correct way for someone wishing to nominate their super to be paid to a charity is by having a super death benefit nomination to their Estate.
To ensure this occurs it is important that it is done as a binding nomination and is redone every three years before it lapses and converts to a non-binding nomination. Having a non-binding nomination means that the trustee will have discretion to determine where the benefit should be paid, and this could bypass the Will and not end up with the charity that the client chose. It must then be clearly set out in the Will that the money from the client’s super is to go to a charity or split between charities.
This is just one example of why the administration of super beneficiaries is so important and why getting legal advice will ensure your assets are dealt with according to your wishes. When considering a charity, it is important to choose a reputable charity that aligns with your personal values.
Spouses usually nominate a charity where they have previously volunteered or have already been making regular donations. We also see situations where clients will spread the money between three or four different charities. However, the very notion of charity is quite personal, and choosing which one to support will depend on a number of factors including life experiences that may prompt support of a particular cause.
Finally, should the surviving spouse still have children, it is worth the spouse having a discussion to address any risk that they may challenge their wishes. Even if the spouse nominates a charity, the children might have a claim on their estate, so it is important the children understand their mother or father’s intentions and what they have put in their Will.
If the spouse has children and decides not to give them money but instead, gives it to charity, it is recommended they include an explanation as part of their Will. In the event it is contested, the letter can be used as supporting evidence in court. Having an accompanying Letter of Wishes that explicitly states those wishes will provide an explanation for the decision and increase the likelihood of wishes being followed.
This article was first published in Personal Wealth Adviser – Issue 8.