Defining ‘beneficiary’ for purposes of this article
A beneficiary is a person who has a legal right to the use or enjoyment of an asset, even though the asset is not owned in his or her name. They have the right to ‘benefit’ from those assets.
Why you should be interested in your beneficiary nominations
In Trust and Estate situations, beneficiaries must be formally named in relevant documents to be able to start to enjoy the status so bestowed on them. For instance –
- in a Will for bequest purposes, from an estate; but
- may initially have recognition eligibility by ‘class’ in Trust situations (whether the Trusts are within estates or otherwise).
[A ‘class’ in this instance may include:
- a direct relative of a named beneficiary, or
- an incorporation owned (at least in part) by a named beneficiary; and,
- other classes can be found in the terms of the Will or Trust.
The strongest, most certain ‘naming’ process is to be directly named in the forming document. Where a beneficiary who is to receive a benefit by virtue of their being within an allowed class, the trustee will need to pass a resolution specifying which person(s) from that class are to benefit at the relevant time. It is prudent that trustee resolutions be documented.
Where might you need to consider nominating a beneficiary/ies?
Most of us will need to consider the nomination of a beneficiary (or set of beneficiaries) – and may well have already done so in respect of:
- life insurance policies;
- superannuation accounts; and/ or
- a Last Will and Testament.
In considering nomination of beneficiaries, you may need to consider the taxation consequences of their nomination, particularly if a sense of equality is intended for a particular group (or class) of beneficiaries.
Nomination in relevant life insurance policies may be obviated if the intended beneficiary is actually the owner of the policy on your life. As a beneficiary under a superannuation account who would become entitled to (a share of) your superannuation death benefits in the event of your demise, a person’s (or entity’s) entitlement may be subject to the discretion of the trustee: alternatively a Binding Death Benefits Nomination1 may be made.
Avoid unintended consequences for your beneficiaries
As part of the Estate Planning role we perform at Continuum Financial Planners Pty Ltd, we are able to guide and advise clients in relation to the appropriateness of particular beneficiary nominations: however, whilst many circumstances seem appropriate in the lifetime of the benefactor (you), there may be unintended consequences for the distribution of your estate if those nominations are not fully considered in your personal succession arrangements.
Adequate provision, estate equalisation and discouraging estate challenges are all areas that will be impacted in your nominating beneficiaries – and where appropriate, a legal adviser may need to be engaged to provide that advice. Our advisers are able to refer you to an appropriately experienced specialist in these matters. To arrange a meeting with one of our advisers, phone 07-34213456, or use our Contact Us facility for prompt attention to your enquiry.
