It’s a fact that many people are living in longer-term de facto relationships than in the past. Longer engagements, second marriages and older couples forming relationships in their golden years are all contributing to this trend.

The reality is that not everyone believes, or wants to engage in, the formal binds of marriage and instead choose to share their lives committed on a personal level.

What is interesting about the trend is that many of the legal entitlements and obligations afforded to married couples are also automatically applied when you’re considered to be in a de facto relationship.

De facto relationship, are you in one?

The important thing to note about a de facto relationship is that the legal status of this is an interpretation based on the evidence of cohabitation and relationship by either the government body, or a court, on application for a specific purpose. 

Each de facto relationship has a different dynamic and in short, there are no hard and fast rules about how the de facto relationship is determined. For example, your entitlements as a de facto partner aren’t established on the anniversary of having lived together for two years but rather accumulate as your relationship progresses. Some rules of thumb are outlined by the Family Court of Australia.

Basically, if you tick most of the boxes then it’s fair to assume that if you, or your de facto spouse, make an application to a court or government body, reliant on a spousal entitlement then you may just achieve this.

Therefore, when considering your super and retirement planning it’s important to know what potential entitlements, and obligations, are attributable under a de facto relationship.

De facto spouse and super

Being mindful of how you can use your superannuation provisions is an important part of your retirement planning.

It's even more important if you are in a de facto relationship.

Under Australian Superannuation Regulation, a spouse is entitled to be nominated as a beneficiary of death benefits on a super fund. Therefore, as long as you and your de facto partner can establish your relationship, you are able to make nominations on your respective super funds.

Similarly, in the event of a relationship breakdown, the legislation also allows for a legal spouse, including a de facto spouse, to make a claim on the superannuation asset as part of the financial settlement.

What’s also worth noting is that if you are separated, but not divorced, and in a de facto relationship then there is the potential on your death for your super to become contested.

For this reason, it’s wise to regularly review your superannuation following lifestyle events, to ensure that everything is structured as you wish.

Super planning tools

Although nothing is ever guaranteed when it comes to legal interpretations and the courts, its good to know that there are tools you can put in place to at least provide evidence of your intentions and help direct the law to interpret things are you would like.

Tools like superannuation binding death benefit nominations, Wills and non-member Trustee Director appointments can assist in directing your superannuation finances upon your death.

A binding nomination on your superannuation fund directs the Trustees of your fund to pay your superannuation benefits to the eligible beneficiaries of your choosing. This instruction occurs at a level above your estate proceedings and is difficult to contest, making it a very powerful tool.

It’s important to note for a self-managed superannuation fund (SMSF), on your death the Executors of your Will become your legal representative and therefore may assume the rights of a Trustee of the fund to assess the validity of the binding nomination and distribute the death benefits. Therefore, it’s important that you at least have appropriate Executors nominated on your Will to carry out this role. 

For complicated family situations where your estate and SMSF may distribute quite differently, then you could also consider a Corporate Trustee and the appointment of non-member directors to assist with the process of distribution to ensure that your binding nomination is carried-out.  If you are in pension phase you can also consider a reversionary pension as one of the management tools for distributing your superannuation from your SMSF.

An Enduring Power of Attorney (EPA) allows you to nominate who will provide you with support to make financial decisions on your behalf if you lose legal capacity. When it comes to superannuation this could be simply the ability to transact on your superannuation to maintain your standard of retirement, however, they cannot adjust any death benefit nominations. 

A Will can also be used to direct your superannuation benefits if you wish to balance this out with other estate assets, or if your superannuation fund only allows for your death benefits to be distributed to your estate.

As with all planning, it is important to ensure that each part of your plan works hand in hand with the other, and that if you have a change in your life, particularly in your relationship status, these are reviewed to assess the potential implications.

If you would like assistance in structuring your retirement planning for you and your spouse, an RSM retirement specialist can assist.

They will help you identify all your relevant circumstances that may impact your planning, discuss and help you establish your retirement goals, and provide you with appropriate guidance and advice to put in place the right measures to achieve your desired outcome.

For more information

Contact an RSM retirement specialist now and ensure that your retirement plans stay on track.

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