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Estate Planning Strategy

Most Australians with significant wealth have a will. Very few have coordinated the financial architecture beneath it.

Estate planning is not a single legal document. It is a coordinated strategy across your will, superannuation, insurance, trust structures, and business interests.

For guidance on binding nominations and fund-level succession, see our SMSF and death benefit nominations overview.

This page explains the financial coordination layer of estate planning. It is written from the perspective of a financial adviser, not a lawyer. Nothing on this page constitutes legal advice. For legal documents including wills, powers of attorney, and trust deeds, engage a qualified estate planning lawyer.

Why a Will Alone Is Not Enough

Superannuation does not form part of your estate. Life insurance follows its own rules depending on ownership and beneficiary structure. Business interests require separate succession arrangements. Family trusts have their own vesting dates and appointor provisions.

Without coordination across all of these structures, wealth does not transfer as intended, regardless of what the will says.

To review how your insurance architecture supports your estate plan, see our life insurance and income protection strategy.

Superannuation and Death Benefits

Super does not generally form part of a deceased estate. Death benefits are paid according to the fund trust deed and any binding death benefit nomination in place. Your will cannot direct where super goes unless the benefit is first paid to your estate under a valid nomination.

Binding Death Benefit Nominations and Lapsing Risk

A binding death benefit nomination directs the super fund trustee to pay your death benefit to your nominated beneficiary. For APRA-regulated funds, a BDBN often lapses after three years. Check your fund’s specific rules. For SMSFs, the trust deed may allow non-lapsing nominations subject to the specific deed. A lapsed nomination returns control of the death benefit to the trustee, who may distribute it differently from your intention.

How Superannuation Death Benefits Are Taxed

Benefits paid to a tax dependant, including a spouse or child under 18, are generally received tax-free. Benefits paid to an adult non-dependant child may attract tax on the taxable component, up to 15% plus 2% Medicare levy on the taxed element, and up to 30% plus 2% Medicare levy on the untaxed element. The tax-free component is received tax-free in all cases.

Testamentary Trusts and Tax Advantages for Beneficiaries

A testamentary trust is a trust created under a will that takes effect on the death of the will-maker. Under current tax law, income distributed to minor beneficiaries from a testamentary trust is taxed at normal adult marginal rates rather than penalty rates, subject to excepted income rules. This can produce significant tax savings over time.

A testamentary trust distributing $18,200 per year to a minor beneficiary with no other income may attract no income tax under current rates, subject to excepted income rules. The same distribution from an inter vivos trust may be taxed at penalty rates of up to 66%. This is an illustrative example for educational purposes only. Actual outcomes will vary based on individual circumstances, applicable tax law, and the terms of the trust.

Testamentary trusts provide asset protection for beneficiaries, flexibility in the timing and structure of distributions, and the ability to manage wealth across generations.

The Role of Life Insurance in Estate Planning

Life insurance serves two key functions in estate planning: providing liquidity for illiquid estate assets, and its ownership and beneficiary structure determining the tax treatment of proceeds.

Insurance inside super is subject to super law. Insurance outside super is paid directly to the policy owner or nominated beneficiary and is generally not subject to income tax. The decision about whether to hold insurance inside or outside super should be made in coordination with the broader estate plan.

Business Interests and Succession

Without a funded succession plan, a business owner’s death can trigger disputes, loss of value, and competing claims. A buy-sell agreement funded with life and TPD insurance can reduce this risk significantly.

Two partners in a professional practice valued at $2.4 million each hold cross-ownership life insurance policies. On the death of one partner, the insurance proceeds may fund the purchase of the deceased partner’s share. This is an illustrative example for educational purposes only. Actual outcomes will vary depending on the business structure, insurance policy terms, agreement drafting, and individual circumstances.

The Coordination Role of a Financial Adviser

An estate planning lawyer drafts the legal documents. A financial adviser builds the financial architecture beneath those documents. Estate planning failures rarely stem from a poorly drafted will. They stem from a will drafted without reference to the superannuation structure, insurance arrangements, business agreements, or trust deeds.

As published in the Australian Financial Review: Wealth transfer and women inheriting wealth | Inheritance traps and family legacy

The Build MyWealth Five-Point Estate Architecture Review

  1. Binding Nomination Audit: are your binding death benefit nominations current, valid, and consistent with your will?
  2. Insurance Alignment Review: is your life and TPD insurance held in the right structure for your intended beneficiaries?
  3. Business Succession Coordination: does your buy-sell agreement align with your will and is the insurance funding current?
  4. Trust Structure Mapping: are your family trust deed, SMSF trust deed, and testamentary trust provisions consistent?
  5. Tax-Effective Transfer Analysis: have you identified the tax treatment of each asset class on transfer to your intended beneficiaries?

Division 296 received Royal Assent on 13 March 2026 and applies from 1 July 2026. For estate planning purposes, the interaction between Division 296 and death benefit strategies, including the treatment of large super balances paid on death, should now be reviewed in light of the enacted legislation. Further ATO guidance may clarify administrative details.

Sangram Rana is an IFA Excellence Awards finalist: Risk Adviser of the Year 2022, 2023, and 2025, SMSF Adviser of the Year 2022 and 2023, and Client Outcome of the Year 2022. Published in the Australian Financial Review, Money and Life, SmartCompany, Inside Small Business, Professional Planner, Life Insurance Guide, CommBank Brighter Magazine, and Benefolk. Corporate Authorised Representative, Lifespan Financial Planning AFSL 229892.

Book a 15-Minute Call to Review the Financial Architecture of Your Estate

If you have not reviewed your estate plan in the last three years, or if you hold an SMSF, family trust, or business interest that creates complexity in your estate, a 15-minute call is the starting point.

Request a Consultation

Phone: 03 7034 4888

Frequently Asked Questions: Estate Planning

No. Superannuation does not generally form part of a deceased estate. Death benefits are paid according to the fund trust deed, trustee discretion, and any valid binding death benefit nomination in place. Your will cannot direct where your super goes unless the benefit is first paid to your estate under a valid nomination.
If your binding death benefit nomination lapses, the fund trustee regains discretion over how your death benefit is distributed. For APRA-regulated funds, binding nominations often lapse after three years — check your fund’s specific rules. SMSF trust deeds may allow non-lapsing nominations subject to the specific deed.
A binding nomination legally directs the trustee to pay your death benefit to your nominated beneficiary. A non-binding nomination is a guide only and the trustee retains full discretion. For estate planning certainty, a valid binding nomination is the stronger instrument.
When a super death benefit is paid to an adult non-dependant child, the taxable component (taxed element) may attract tax of up to 15% plus the 2% Medicare levy. The untaxed element may attract tax of up to 30% plus the 2% Medicare levy. The tax-free component is received tax-free.
A testamentary trust is a trust created under a will that takes effect on the death of the will-maker. Under current tax law, income distributed to minor beneficiaries from a testamentary trust is taxed at normal adult marginal rates rather than penalty rates, subject to excepted income rules. This may produce significant tax savings over time.

This depends on your estate plan. Insurance inside super is subject to super law including the tax treatment of death benefits paid to non-tax dependants. Insurance outside super is generally paid directly to the nominated beneficiary and is not subject to income tax. The right structure depends on who you intend to benefit and how.

A financial adviser builds the financial architecture beneath the legal documents — the superannuation strategy, insurance structuring, business succession funding, and trust coordination. Estate planning lawyers draft the will and legal documents. The two roles are complementary and both are required for a complete estate plan.

A buy-sell agreement is a legally binding arrangement between business partners that governs the transfer of ownership on death, disability, or exit. Properly funded with life and TPD insurance, it pre-agrees the value, funding, and transfer terms. The agreement must be consistent with the will to avoid conflicting claims.

The Division 296 legislation has passed both houses of Parliament and is awaiting Royal Assent. For estate planning purposes, the interaction between Division 296 and death benefit strategies may require review once enacted. The treatment of large super balances paid on death under the new regime should be modelled as part of the broader estate plan.

Estate plans should be reviewed every three years at minimum, and immediately following any major life event including marriage, divorce, the birth of a child, a significant change in asset values, a business sale, or a change in superannuation balance that approaches the Division 296 threshold.

Related pages: SMSF Strategy | Risk Insurance Strategy | Business Owners and SME Operators