What Happens To My Super When I Die?

For most Australians approaching retirement age, superannuation is a significant asset, and for many it is second in value only to their home. Clients are often surprised to learn that their superannuation does not automatically form part of their deceased estate and any directions in their Will may have no effect on super. 

Superannuation Death Benefits

When someone dies, the balance of their superannuation account is generally paid as a death benefit. The member can elect who is to receive that death benefit. Nominations can be made and changed, provided the member has capacity. 

Who Can Receive Your Super? 

Only certain people are eligible as death beneficiaries. This includes: 

1. Your dependants (spouse, de facto partner, children, step-children or anyone financially dependent on you); 

1. Your legal personal representatives (the executor of the estate).  

If you nominate a dependant or multiple dependents, you can dictate the percentage that each nominee will receive. Nominating the legal personal representative of your estate will result in the super proceeds being paid to the estate. The terms of your Will can then dictate how these proceeds are to be distributed.  

Importance of a Valid Nomination 

For a nomination to take effect it must be valid at the time of death. If there is no nomination in place or if the nomination is valid then it is up to the trustee of the super fund to decide when and to whom benefits are paid. This can lead to significant unintended consequences, additional delay and expense, and stress to the deceased’s member’s family. 

Direct Nomination vs Estate Distribution 

Nominating your super to go directly to beneficiaries is more certain and usually faster than directing super to be paid to beneficiaries via your estate. It also has the benefit of separating, and therefore protecting super from claims against the estate. 

On the other, there are also potential advantages to superannuation being channelled through the estate. For example: 

• Where intended recipients are not valid death beneficiaries; 

• Where recipients are minor children; 

• If estate assets are insufficient to discharge estate liabilities; 

•  In some cases, where significant tax savings are possible. 

Lapsing/non-lapsing nominations 

Depending on the governing rules of the super fund, death benefit nominations may be either lapsing or non-lapsing.  

A lapsing nomination must be renewed or amended at least every three years. A non-lapsing nomination is valid until changed. Most retail and industry fund nominations are lapsing but it is important to check the rules of your specific fund. 

Binding/non-binding nominations 

A binding nomination requires the super fund to pay a member’s proceeds to the nominated beneficiary. The nomination must be carried out, and the fund has no discretion to consider competing claims. 

A non-binding nomination means the super fund has discretion to assess the circumstances and determine who the most appropriate recipient is. 

Whether to select binding or non-binding and lapsing/non-lapsing nominations will depend on your own circumstances, and the correct decision is crucial to ensuring your intentions are carried out and your super protected. 

Professional advice is vital 

Superannuation succession can be a confusing and complex area of accounting and law. You should seek professional advice before making any decisions about how your super should pass in the event of your death.  

Disclaimer:

The information contained in this article is for general informational purposes only and is not intended to provide legal advice or substitute for the advice of a professional. This information does not consider your personal circumstances and may not reflect the most current legal developments. Should you need advice, please contact our firm for targeted information relating to personal your situation. 

Greenhalgh Pickard’s Wills and Estate Team