Superannuation is a tax effective way to build your wealth for your retirement.
Under superannuation law, you can only nominate a superannuation dependant or dependants (at the time of your death) or your estate to receive your superannuation death benefit and any life insurance that may be held in that superannuation fund, on your behalf.
Having said this, we continue to come across scenarios where people truly believe that they can leave their superannuation death benefit to whomever they like, which is not the case.
Who is a Superannuation Dependant?
- The member’s spouse or partner (de facto);
- The member’s child (of any age) and this includes an adopted child, stepchild or a child born after the member’s death;
- A person who is wholly or partially financially dependent on the member at the time of death, irrespective of their family relationship; and
- A person who was in an interdependency relationship with the member at the time of their death.
If you have no superannuation dependants, you must nominate your estate to receive your superannuation death benefit. If you leave a valid Will at the time of your death, the superannuation will then pass as per the terms of your Will.
Common Question: why can’t my parents be my nominated superannuation death benefit beneficiaries?
Unless you are in an interdependency relationship with your parents at the time of your death, you can’t nominate your parents to receive your superannuation death benefit.
If you would still like to pass your superannuation death benefit to your parents, you must nominate your estate as the beneficiary of your superannuation death benefit and then prepare a Will which provides that your superannuation death benefit passes to your parents.
How do I nominate my beneficiaries?
When it comes to nominating a beneficiary, there are two options:
- Binding Nomination
If you make a valid Binding Death Benefit Nomination which has not lapsed and is in accordance with that superannuation fund’s trust deed and the superannuation laws, the trustee of the superannuation fund must pay your superannuation death benefit in accordance with your nomination.
- Non-Binding Nomination
If you make a Non-Binding Death Benefit Nomination, the trustee of the fund will consider such nomination, however, they will have the final say over which superannuation dependant beneficiaries and/or your estate and in which proportions will receive your superannuation death benefit
What happens if I don’t nominate anyone?
If you don’t nominate anyone specifically, the trustee of the superannuation fund has discretion and will need to decide which superannuation dependants and/or your estate and in what proportions, will receive your superannuation death benefit.
A Case Study
Meredith is single and loves spending time with her siblings and parents. In the event of her death, Meredith wants to make sure that her super is split so that her parents get half, while the other half is paid to her two siblings.
Her parents and siblings are not superannuation dependants of hers. For this reason, Meredith can’t make a death benefit nomination in favour of them directly. However, Meredith can make a binding death benefit nomination in favour of her Legal Personal Representative (i.e. her estate).
Meredith then arranges for a lawyer to draft her Will (with the superannuation to pass to her parents and two siblings) and Binding Death Benefit Nomination accordingly.
What do I do now?
To ensure you have appropriately nominated beneficiaries in respect of any superannuation you may hold:
- Check that your super fund offers beneficiary arrangements that suit your circumstances;
- Check those you have nominated or are nominating are eligible superannuation dependant/s and/or your estate;
- If you plan to nominate your estate, ensure that your Will is current and up to date; and
- If your death benefit nominations are lapsing in nature, ensure that you review and renew them before they expire.