When looking to finalise an estate, most will assume their super is dealt with automatically in their will. But this is not the case. Unlike other assets, your super is held in trust. Misunderstanding is commonplace here. So to ensure your superannuation savings, and any related insurance proceeds, are paid to the right person when you die, it is important to understand who is an eligible beneficiary.
Super trustee will normally make the decision regarding your death benefit and pay your death benefit to one or more of your dependents, or to your estate.
Benefits are dealt with in two ways. The first is you can make a binding death nomination to a dependent and the other, is if you do not make this nomination, the trustee will make a decision on who to pay.
There is a big difference between nominating your beneficiary and making a binding death benefit nomination. If you nominate a beneficiary that is not binding, the trustee will consider the information provided, identify potential dependants and may also check the deceased’s will, if there is one.
If you make a binding death benefit nomination which clearly states the beneficiary, then the trustee does not have the discretion to make this decision. If you forget to nominate anyone, or take no action, the trustee is bound by the law to pay your superannuation to your estate.
To ensure your super goes to the right person, Consider these tips:
There is a legal definition of dependent. Dependents are a spouse, which includes married people, de facto partners, same sex de facto partners, children, and those who fall into the category who depend on you financially, or people with whom you have an inter-dependent relationship.
Super is not about providing windfall gains; it is about providing retirement benefits and making sure those who are dependent are looked after. Super is taxed concessionally and is intended to be used for the purpose of looking after the dependents of the deceased.
Generally, the parents of a deceased, or other family members, such as siblings, nieces or nephew will not normally qualify. These people can only qualify if they were financially dependent at the time of death of the fund member.
If you have no dependents, the funds will be paid to your estate.
‘Binding Death Benefit nomination’
If you want to be certain about who receives your super when you die, you can have a binding death nomination – you will need to update this nomination every three years.
Remember, the nominated person or people must be dependents at the time of your death for the binding nomination to work. If you’re single or have no dependents, then you can leave your superannuation to your estate.
If you have not nominated a beneficiary, contact us and we can assist you with options on who you wish to nominate.
Death payouts are not always tax-free. If you want to leave your superannuation to your children, be aware that once they are over 18 and they are no longer financially dependent on you, then under tax law they will have to pay tax on the benefit they receive. If they are under 18 and still dependent, they will receive superannuation benefits tax free.