What happens to your superannuation fund when you die?
Most of us don’t like talking about death or thinking that someone close to us is going to pass away one day. But it is often important life events, such as the birth of a child or a marriage, that turn our mind to looking after our loved ones when we die.
An important asset that is often overlooked during that process is your superannuation. To ensure your loved ones are properly cared for, it is important to understand what happens to your super when you die and how can you ensure that one of your largest assets is dealt with in accordance with your final wishes.
What is my superannuation benefit?
Usually superannuation is made up of the actual superannuation benefit (contributions by your employer and you) together with any insurance or death benefit.
What happens to my super once I die?
When you die, the trustee of your superannuation fund will determine the distribution of your superannuation funds in accordance with the relevant law and what is deemed to be fair and reasonable.
The trustee will firstly look to whether or not a binding death nomination exists and if so, whether it has been executed correctly.
If there is no valid binding death nomination, the trustee will then consider whether the deceased person has any dependents and interdependent relationships to which the superannuation benefit could be distributed.
Dependents include a spouse or partner; and any children (including adopted children) of the deceased person. An interdependent relationship is a relationship where a person is financially dependent upon another person, such as an elderly parent who lives with and is supported by one of their children.
Should you have no dependents or interdependent relationships, the trustee will pay the benefit to any other person it determines appropriate as required by the Superannuation Industry (Supervision) Act 1993.
Rather than allowing the trustee to use their own judgment to determine how to distribute your superannuation, by making a binding nomination you can nominate a partner, child or person who is financially dependent upon you, to receive the benefit. Another advantage of a binding nomination is that you can set the exact percentages of your super that you would like each beneficiary to receive.
A binding nomination allows you to have peace of mind knowing that your appointed beneficiaries will receive the benefit in the way that you intended. This is of particular comfort if your personal circumstances are complicated and where your wishes are unlikely be met by a trustee exercising their discretion.
Furthermore, a binding nomination can help ensure that your beneficiaries are paid out in an expedient manner as the trustee does not have to take the time to make their own determination.
Depending on your super fund, a binding nomination may only be valid for three years. If this is the case, it is important to make sure that it is renewed every three years. Usually your superannuation fund will send you a reminder that your nomination is about to expire. It is then simply a matter of completing and returning the relevant form.
Other super funds have non-lapsing binding notifications which means it is important to remember to update your binding notification if your personal circumstances change and your current binding nomination no longer reflects your wishes. Of course, you can also update your binding nomination at any time.
At DSS Law, our lawyers have vast experience assisting clients with estate planning manners including the legal implications involved in dealing with superannuation in the event of death. Our team of specialists will ensure that the welfare and administration of your financial and legal affairs are always managed in your best interests.
DSS Law insight articles are intended to provide commentary and general information. They should not be relied upon as formal legal advice. If you would like specific advice relating to this topic, please contact DSS Law on firstname.lastname@example.org.