Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 166

Estate planning and your wishes after death

Part 1 of this series on estate planning looked at the decision-making processes involved in preparing an effective plan. Part 2 outlined the documentation required to ensure that your strategy is effectively executed, starting with your will.

In this final part, we look at areas that are easy to overlook in the overall estate-planning process but are vitally important for ensuring that your funds go to those you intended them to and that your house is in order way before that time arrives.

Powers of Attorney

An Enduring Power of Attorney is a legal document where you appoint a person of your choice to manage your assets and financial affairs if you are unable to do so due to illness, accident or absence (such as being overseas). It also applies in the event that you lose mental capacity to make decisions, and may therefore apply for many years in the event of dementia or other cognitive illness.

A medical power of attorney allows you to appoint someone to make decisions about your medical treatment if you become mentally or physically incapable of deciding for yourself.

These two documents give your chosen attorney or attorneys almost limitless power, and therefore require careful consideration and great trust. While the Power of Attorney can be challenged and an alternative Guardian appointed in the event that your attorney is behaving unscrupulously, there is no guarantee of success and a publicly appointed Guardian may be less cognisant of your personal wishes than a close family member or friend.

To guard against unscrupulous behaviour, many solicitors will advise that two or more attorneys be appointed jointly. While this can cause conflict, it creates a system of checks and balances. In the event that you have no preferred loved one or professional to appoint, you can appoint the Public Trustee in your state. Often, however, a close acquaintance will take a more personal interest and therefore be more likely to look after your wishes, and many solicitors will recommend this option.

Superannuation death benefits

Superannuation death benefits are often an individual’s largest asset, particularly if the family home is held in joint names. These are not automatically captured by your estate, and therefore you should take steps to ensure that benefits are distributed according to your wishes.

Firstly, understand how your super fund trustee deals with death benefits. Some automatically pay all death benefits to the deceased’s estate and do not distribute benefits directly. Others distribute according to their discretion, which generally favours a spouse and minor children over other potential beneficiaries such as adult children. Some offer binding (and even non-lapsing) death benefit nominations which allow you to direct to whom your funds are paid.

An SMSF generally allows all of these options, however the trust deed must explicitly provide for binding nominations. Only certain individuals can receive a superannuation death benefit directly, including your spouse (which could be de facto and same sex partners), children (including step, adopted and adult children), any tax dependants and a person who is in an interdependent relationship with you. The tax treatment of your benefit differs depending on these relationships. Others, such as parents or siblings, can only receive your superannuation benefit via your estate.

Once you know what options are available to you, choose your preferred option and document it. Some solicitors will advise to have all proceeds paid to the estate, so the will can deal with distribution. This is often the case where a testamentary trust has been incorporated into the will. In this case, make a binding nomination to your estate if this option is offered by your fund. Other specialists believe the tax benefits and flexibility of paying a death benefit pension (generally only available to a spouse, minor child or disabled child) make this a better option. Again, ensure this is documented in a binding nomination or consider a reversionary pension, while being mindful of social security and other potential considerations.

SMSFs are a particularly important area of estate planning, as the surviving trustees of the fund have full discretion as to how your death benefits are paid in the event that you have not documented your wishes in a valid binding nomination. This has led to some high-profile court cases and adverse outcomes for potential beneficiaries, which cannot be overturned, despite the clearly valid claim (in principle if not in law) of the wronged beneficiary. Ensure your solicitor has experience in this area, and ensure your trust deed and nominations are carefully prepared; inadequate documentation has caused much grief and expense.

Insurance

Non-superannuation insurance policies should have clearly specified, up-to-date beneficiaries nominated. Check these each time you receive your annual statement to ensure nothing has changed. This includes total and permanent disablement and trauma/critical illness policies that may have life cover attached. The proceeds of these policies will be paid directly to the nominated beneficiary and bypass your estate entirely, so can be an effective way of equalising an otherwise unequal distribution or ensuring your loved ones have access to funds that may otherwise take some time to become available.

Insurance policies held inside superannuation are treated as super death benefits as per the above (albeit with different tax treatment, but that’s for another article).

Ultimately, ensuring your wishes will be met after your death or in the event of your illness or incapacity can be expensive and time-consuming. However, it may be the greatest gift you leave your loved ones, making their lives a little easier in a time of grief. The complexity of these issues illustrates why a well-qualified professional is imperative in ensuring the right outcome for you and those you care about.

 

Gemma Dale is the Head of SMSF Solutions at National Australia Bank. This information is general only and does not take into account the personal circumstances or financial objectives of any reader. Readers should consider consulting an estate planning professional before making any decisions.

 

RELATED ARTICLES

Planning to make your money last forever

Seven items your estate plan may have left out

Death and taxes on your own terms

banner

Most viewed in recent weeks

16 ASX stocks to buy and hold forever, updated

This time last year, I highlighted 16 ASX stocks that investors could own indefinitely. One year on, I look at whether there should be any changes to the list of stocks as well as which companies are worth buying now. 

UniSuper’s boss flags a potential correction ahead

The CIO of Australia’s fourth largest super fund by assets, John Pearce, suggests the odds favour a flat year for markets, with the possibility of a correction of 10% or more. However, he’ll use any dip as a buying opportunity.

2025-26 super thresholds – key changes and implications

The ABS recently released figures which are used to determine key superannuation rates and thresholds that will apply from 1 July 2025. This outlines the rates and thresholds that are changing and those that aren’t.  

Is Gen X ready for retirement?

With the arrival of the new year, the first members of ‘Generation X’ turned 60, marking the start of the MTV generation’s collective journey towards retirement. Are Gen Xers and our retirement system ready for the transition?

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

What Warren Buffett isn’t saying speaks volumes

Warren Buffett's annual shareholder letter has been fixture for avid investors for decades. In his latest letter, Buffett is reticent on many key topics, but his actions rather than words are sending clear signals to investors.

Latest Updates

Investing

Designing a life, with money to spare

Are you living your life by default or by design? It strikes me that many people are doing the former and living according to others’ expectations of them, leading to poor choices including with their finances.

Investment strategies

A closer look at defensive assets for turbulent times

After the recent market slump, it's a good time to brush up on the defensive asset classes – what they are, why hold them, and how they can both deliver on your goals and increase the reliability of your desired outcomes.

Financial planning

Are lifetime income streams the answer or just the easy way out?

Lately, there's been a push by Government for lifetime income streams as a solution to retirement income challenges. We run the numbers on these products to see whether they deliver on what they promise.

Shares

Is it time to buy the Big Four banks?

The stellar run of the major ASX banks last year left many investors scratching their heads. After a recent share price pullback, has value emerged in these banks, or is it best to steer clear of them?

Investment strategies

The useful role that subordinated debt can play in your portfolio

If you’re struggling to replace the hybrid exposure in your portfolio, you’re not alone. Subordinated debt is an option, and here is a guide on what it is and how it can fit into your investment mix.

Shares

Europe is back and small caps there offer significant opportunities

Trump’s moves on tariffs, defence, and Ukraine, have awoken European Governments after a decade of lethargy. European small cap manager, Alantra Asset Management, says it could herald a new era for the continent.

Shares

Lessons from the rise and fall of founder-led companies

Founder-led companies often attract investors due to leaders' personal stakes and long-term vision. But founder presence alone does not guarantee success, and the challenge is to identify which ones will succeed in the long term.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.