Your superannuation doesn’t always get distributed in accordance with your Will.

For most people, one of the most valuable assets they own, is their superannuation, which often has life insurance attached to it. For young people, this is often the only significant asset they own. Yet, when it comes to planning, superannuation is often not thought about.

Most people assume that their superannuation will be paid to whoever they have left their assets to in their Will – or they think they have made a valid superannuation nomination. However, this is not always the case – so be careful!

What is a superannuation death benefit?

A superannuation death benefit is the total amount of money paid by the trustee of your super fund after your death and it includes: your superannuation account balance plus any life insurance payout (if you hold life insurance within your super account).

Who is entitled to your superannuation death benefit payments?

By law, your superannuation can only be paid to someone who qualifies as a “superannuation dependant”. A superannuation dependant includes a spouse or a child or any person with whom the deceased had an interdependency relationship. It also includes your legal personal representative (“LPR”) i.e. the Executor nominated in accordance with your Will.

Can I choose who my super gets paid to?

  • The trustee of the super fund generally has discretion as to who they pay the funds to, unless there is a binding nomination in place.
    • If you make a binding nomination, and it is valid, that removes the discretion from the super fund to decide who to pay and they must pay the person you have nominated.
    • If you have no nomination in place, this could result in your superannuation being given to someone who you do not want to receive it. For example: the definition of a superannuation dependant may include a new partner you have just moved in with – and you may not want that person to get the funds. If they make a claim and you haven’t made a nomination they may be successful in getting your superannuation.
  • If you nominate a non-super dependant to receive your super – the nomination will be invalid and it will fail.
    • For example: you generally can’t nominate your siblings or parents, unless they qualify as a person with whom you had an interdependency relationship.
    • Superannuation funds often don’t let you know you have made an invalid nomination. Your family doesn’t find out until after your death and the nomination fails.

There may be tax implications on your superannuation payments.

Qualifying as a superannuation dependant does not mean that a person will also be entitled to obtain tax concessions on the death benefit. There is a difference in the meaning of dependant for super and tax purposes. Careful consideration needs to be given when you nominate who gets your superannuation as the tax consequences could be significant.

What does this mean for you?

  • DON’T assume that your superannuation will be paid as directed in your Will.
  • EVERYONE must consider their circumstances and how they want their super to be paid.
  • In particular: if you are a blended family, or you have no super dependants, or you want your superannuation to go to a particular person, then you need to start planning.
  • When you are making these decisions you also need to consider what will achieve the best outcome for tax purposes.

What should you do?

If you haven’t reviewed your Will and your superannuation nominations in the last three years, or you have never thought about it – now is the time! Contact us now here.

MV Law Canberra

Ph: (02) 6279 4444

Email: info@mvlaw.com.au