Death benefits

Sort death benefits at start of divorce action

death benefits divorce

Death benefits should be changed at the outset of a divorce to prevent former partners receiving monies that are no longer intended for them.

SMSF members going through a divorce should address where any death benefits might go before any splitting orders are complete to prevent any benefits being paid to a former spouse, according to a technical expert.

SuperConcepts technical and private wealth executive manager Graeme Colley said superannuation and death benefits were split during a divorce via an arrangement or order made by the Family Court, but they could not operate if a member died before both parties had agreed to the splitting arrangement.

“When looking at death benefit nominations and death benefits in relation to the splitting arrangements, you need to think hard about this because what happens if the agreement hasn’t been signed is that it is regarded as being a non-entity for superannuation purposes,” Colley said during a webinar today.

“If a member dies prior to the order being made, that means the order won’t operate because if it has not been signed, you can’t say it is a an agreement.

“What happens in those cases where one of the parties dies prior to the signing of the agreement is the death benefit nominations and any reversions that might be paid for pensions may end up, with the superannuation benefit, with the ex-spouse.”

He said SMSF practitioners should be keeping this in mind when dealing with clients going through a split and suggest to them a first action to take would be to change the death benefit nomination or remove a reversion if possible without computing the related pension where they nominated the ex-spouse.

“This should be one of the first things that needs to be done inside the fund or if it’s not done there, to include it in any agreement or court orders that are put in place because you don’t want the wrong person to end up with the money,” he said.

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