Understanding what happens to your superannuation when you die isn’t just about planning for the future – it’s crucial for ensuring your loved ones are taken care of in your absence. We know planning for when you won’t be around can be daunting and unpleasant. But we hope this article makes the process as clear and straightforward as possible so you can feel empowered to make these important financial decisions.
The Superannuation Death Benefit
Super paid after a person’s death is called a super death benefit. This amount includes the saved money in the account and any insurance payouts. This super death benefit goes to dependents or named legal receivers.
Your Super Is Not Included In Your Will
Did you know that, unlike other assets, your Super doesn’t automatically incorporate into your will? Your Super (and any insurance payouts) aren’t considered part of your estate. This is because, legally, your Super is considered to be in a trust until you are able to access it.
When a person passes away, their superannuation fund is usually paid to their nominated beneficiary. Superannuation death benefits are unique and have distinct rules for recipients. You can express your preferences by making a nomination. However, only some nominations are binding, which means the super fund may only be obligated to adhere to your nomination if specific conditions are met.
You might be thinking, ‘Well, I don’t need to nominate a beneficiary because I don’t have much in my super’—this may be the case. However, you could have a substantial life insurance policy included in your Super, which will be paid out in the super death benefit as well.
Who Can You Nominate as a Superannuation Beneficiary?
You need to nominate a beneficiary to determine who will receive your Super when you pass away. This will ensure that your wishes are followed and keep your super benefits within the intended hands. This person could be a dependent—such as your spouse, children, or someone financially reliant on you at the time of your death. You can also nominate your legal personal representative to ensure that the funds are distributed according to your will.
Deciding on a beneficiary is not something to do lightly. If you choose a dependent directly, they could get the death benefits more quickly and with potential tax advantages. On the other hand, nominating your legal personal representative means that your Super goes into your estate and gets handled according to your will. This approach might suit those without direct dependents or with more complex wishes for their estate distribution.
The law has a unique perspective on dependents regarding super-death benefits. It encompasses not only those directly relying on you but also interdependent relationships and financial dependents. Additionally, it’s essential to consider that superannuation death benefit payouts can be contested in a will or probate dispute.
According to superannuation law, a dependant can be:
- Your partner or spouse (married or unmarried)
- Your children (genetic or otherwise)
- Interdependants (individuals who have a close personal relationship with you)
- Other financial dependants (for example, someone who relies on you financially)
- Your estate or legal personal representative
If a deceased person hasn’t nominated a beneficiary (or has made a non-binding nomination), the trustee of the fund may:
- Use their discretion to decide which dependant/s to pay the superannuation death benefit to
- Make a payment to the deceased’s legal personal representative
Different Types of Beneficiary Nominations
Choosing who gets your Super when you pass away is a big decision. You have several options for nominating a beneficiary, each with its own rules.
- Non-Binding Nominations
You can specify who you’d like your Super to go to, but the final decision is up to the super fund’s trustee. They’ll consider your wishes, but they’re not bound by them. If you opt for a non-binding nomination, be aware that the super fund’s trustee has the final decision but considers your preference. - Binding Nominations
A step up from non-binding, this nomination type forces the super fund to give your Super to the person or people you’ve named, as long as it’s valid at the time of your death. For a binding nomination, keep in mind that it must be witnessed by two adults who are not mentioned in the will. - Non-Lapsing Nominations
Similar to binding nominations, these don’t expire after a certain period. Your super fund will follow your instructions indefinitely unless you decide to change them. If you want a long-lasting effect, opt for a non-lapsing nomination if your fund provides this option. A non-lapsing binding nomination doesn’t expire unless you cancel or update your nomination. - Reversionary Beneficiary Nominations
Mainly used with pension accounts rather than standard super accounts, they allow your pension payments to automatically continue to someone (like a spouse) if you die.
If you’re unsure which type of beneficiary nomination suits your needs or how to make one, one of our financial advisors can guide you through the process. Find out more about how we can help through our Superannuation Advisory Services.
How Do You Nominate a Beneficiary for Your Super?
Your superannuation fund typically offers a straightforward process for nominating a beneficiary, which can usually be completed online or by submitting a form. You can also contact your super fund directly for support. It is always a good idea to review and reassess your beneficiary nominations periodically and after significant life events, such as marriage or the birth of a child.
How Can a Financial Advisor Help?
A financial advisor can guide you through setting up your Super to match your wishes after you pass. They can also explain the tricky tax rules around death benefits and help you keep your nomination form updated. For personalised advice on making superannuation decisions, speak with a financial advisor at Super Network today.
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