In most instances, superannuation does not form part of a deceased’s estate. This means that in most cases, it is not paid to the estate unless the deceased person has made a valid and binding nomination to their estate.
Superannuation and life insurance cannot be used to pay estate debt and liabilities – section 205 of the Life Insurance Act 1995 (Cth). Superannuation and life insurance are “protected assets” unless expressly directed in their will.
Many people don’t realise that when preparing a will, superannuation does not automatically form part of their estate.
Assets included in the will are deemed to be only assets owned in your name, such as your house, car, investments, savings and so on and it is these assets that can be dealt with under your will.
Superannuation is held in trust by the trustee of your super fund and different rules apply. It is the responsibility of the trustee to determine how your super benefit is paid after you die.
What happens if I don’t nominate a beneficiary for my super?
If you don’t make a nomination, or your nomination becomes invalid, the trustee will decide how your super benefit will be paid out after your death. The trustee will be guided by super law should this need occur.
How do I leave my superannuation benefit to my children?
If you want to leave your super benefit to your children, you will need to make a binding death benefit nomination, which can be either lapsing or non-lapsing. Lapsing nominations must be renewed every three years, while non-lapsing nominations will stay in place until the trustee receives a new or updated nomination.
Non dependent children, are they treated differently?
For the purpose of receiving a super death benefit, children are either dependent or non-dependent beneficiaries. If a child is a dependent beneficiary, then the money they receive is tax free. If the child is a non-dependent beneficiary, then the death benefit is subject to tax.
Can I leave my super to my nieces or nephews or charity?
The law requires a trustee of a super fund to pay a death benefit to a dependent beneficiary or your estate.
Nieces, nephews or charities are not generally considered to be dependent beneficiaries. Dependent beneficiaries are your spouse, your children, anyone who is in an interdependent relationship with you or any other person who, at the date of your death, was wholly or partly financially dependent on you. Special arrangements may apply for beneficiaries who are under the legal age of 18 years or who cannot manage their own affairs.
If you wish to leave your super benefit to person or persons who are classified as non-dependant, you will need to make arrangements that your benefit be paid to your estate.
If you have an up-to-date will, you can make a binding non-lapsing death benefit nomination to your legal representative.
Then your super benefit will be paid to your estate and paid out according to your will, if it is valid at the time the death benefit is assessed.
When is a death benefit nomination for my super benefit invalid?
A death benefit nomination for your super benefit may be invalid if:
- the percentage allocation you requested does not add up to 100%
- the form has been incorrectly witnessed
- the form has been incorrectly signed and dated
- one or more beneficiaries nominated are not defined as dependants under superannuation law or the legal personal representative of your estate
- the person you nominated as a dependant is no longer a dependant, e.g. you have divorced your former spouse
- if you have made a lapsing binding nomination which has expired and has not been renewed (a lapsing binding nomination is valid for three years from the date it is signed)
- the nomination has been revoked (or cancelled) and a new nomination has not been made.