The purpose of a superannuation benefits trust ultimately to benefit a fund member. As such, a superannuation benefits trust may be established either by the fund member’s will (formally known as a superannuation benefits testamentary trust), or by a deed formed after the death of a member (formally known as a superannuation benefits deed trust).
Superannuation benefits testamentary trust
Where a superannuation benefits trust is formed under a will, it must be funded by superannuation death benefits that are paid to the member’s estate. To give effect to this trust, the will should contain provisions that stream superannuation death benefits payable to the estate to the superannuation benefits testamentary trust, rather than streaming such benefits to a beneficiary.
The benefits of a superannuation benefits testamentary trust are that the will maker (the fund member) can ensure that their surviving spouse retains full control over and access to the superannuation death benefits, and access to income tax concessions (as set out above).
However, it is important for a will-maker to keep in mind that because of tax implications the preferred distribution of superannuation death benefits may depend upon circumstances at the time. For example, it may be preferable in some instances to direct superannuation benefits to tax payer dependents who are not taxed, and leave non superannuation assets to tax payer non-dependents. A will maker may also include an adjustment clause to ensure the total amounts being paid to the beneficiaries from both the superannuation fund and the estate, and any other sources, are equal.
Superannuation benefits deed trust
A superannuation benefits trust is formed by deed usually where there is not included a superannuation benefits testamentary trust in a will, or where there is such a trust set out in a will, however it is inappropriate to pay superannuation entitlements to a member’s estate due to insolvency issues, or any risk of claims against the estate by any person believing they were unfairly treated under the will. In either event, a superannuation benefits deed trust may be established after the death of the will maker, and before the trustee of the superannuation fund pays the superannuation entitlements.
The benefits of paying superannuation benefits into a superannuation benefits deed trust as opposed to payment of surviving spouse is that it will protect the payment for the benefit of the children of the deceased fund member in the event that the surviving spouse my develop problems (for example, where they may face insolvency, or where there is a breakdown of a subsequent marriage).