Superannuation Funds and Death Benefits 

A Superannuation Fund, or Super for short, is an Australian retirement savings plan. Employers contribute a percentage of their employees’ wages to the fund. Individuals can also add to their Super by making voluntary contributions. The fund is managed by trustees and aims to grow the money over a person’s working years. This money can then be used to provide financial security during retirement. 

How Can Superannuation Death Benefits be Separate from Your Estate? 

A key aspect of superannuation is that death benefits are treated separately from your estate. This means that they do not automatically follow the instructions outlined in your will. Instead, super death benefits can only be distributed based on the rules of the superannuation fund or specific binding death benefit nominations made by the individual. Understanding this distinction is crucial to ensure your super is handled according to your wishes after your death. 

Why Should You Consider Superannuation as a Part of Your Estate Plan? 

Even though death benefits do not form part of your estate by default, you need to take separate steps to determine how these funds will be managed and distributed upon your death. Without a proper plan, the distribution of your superannuation might not be in line with your intentions, this would leave your family members restricting access from your wealth, potentially leaving loved ones without access to these vital funds. Hence, carefully considering Superannuation within your overall estate strategy ensures a smoother distribution of wealth to your chosen beneficiaries and to your bloodline. 

What is the Necessity of Including Superannuation in Your Estate Planning? 

The inclusion of superannuation in Estate Planning is vital since it represents a significant portion of individual’s wealth. Incorporating superannuation into your estate planning procedure guarantees that the death benefits are allocated effectively and in accordance with your overall financial goals. It’s important to keep your nominations and superannuation documents up to date, as these play a pivotal role in determining the rightful beneficiaries of your death benefits. 

Steps to Create Superannuation Death Benefits 

• Step 1: Review Your Superannuation Fund Rules to ensure you understand how your fund handles death benefits and what nominations they accept. 

• Step 2: You can legally appoint who will receive your Superannuation Fund benefits after you die. This is called making a Binding Death Benefit Nomination. The trustees of your Super fund are legally obligated to follow your wishes and pay the benefits to your chosen beneficiaries. 

• Step 3: Regularly update the nominations in order to maintain your binding nominations up to date, particularly if your personal situation changes. For example; Birth of Children, Marriage or Divorce. 

• Step 4: Work with an expert to make sure that your superannuation is incorporated into your estate plan, seek advice from estate planners or legal specialists. 

• Step 5: Examine the tax implications to minimise the tax consequences for your beneficiaries, get financial advice since some super death payouts may be taxable. 

What Happens to Superannuation When a Person Dies? 

When a person dies, their superannuation balance, along with any life insurance benefits held by the super fund, becomes a superannuation death benefit. This benefit is not automatically included in the deceased’s estate. The trustee of the super fund determines how the superannuation death benefits will be distributed, following the individual’s nominations or fund rules. If there is a binding death benefit nomination, the trustee must pay the death benefit to the nominated beneficiaries. Without a valid nomination, the trustee may use discretion in deciding which eligible beneficiaries will receive the benefit. 

Who is a Dependent? 

A dependent is someone who is eligible to receive the death benefit. 

• Spouse (including de facto) 

• Children (of any age) 

• Financial dependents (someone who was financially dependent on the deceased) 

• Interdependency relationship (someone who lived with the deceased and had a close personal relationship, such as sharing financial and domestic support) 

How to Apply for Super Death Benefits? 

• Filling out the necessary forms provided by the super fund. 

• Providing documentation such as proof of identity, proof of death (e.g., death certificate), and any relationship evidence (e.g., marriage certificate, birth certificates of children). 

• In some cases, providing details of financial dependency or evidence of an interdependent relationship may also be required. 

Legal Implications 

• Trustees of superannuation funds are legally bound to adhere to the fund’s rules and any valid, binding death benefit nominations. This means they must act in accordance with the established guidelines and respect the wishes expressed by members in their death benefit nominations. 

• To guarantee that your death benefits are allocated as you desire, it’s crucial to fill out and regularly update binding nominations. These nominations serve as legally binding instructions for how your superannuation benefits should be distributed upon your passing. 

• If no valid nomination exists or there’s a dispute, beneficiaries can challenge the distribution of superannuation death benefits. Ensuring that your documentation is clear and up to date minimises the risk of such disputes. 

Your superannuation fund is a substantial financial asset that demands specific attention in estate planning. Usually, superannuation death benefits bypass your Will and have unique legal implications. To ensure your wishes are fulfilled, carefully consider who will receive your superannuation, how it will be paid, and the potential tax consequences. Creating binding beneficiary nominations and seeking professional advice are essential to safeguard your family’s financial future. By integrating superannuation into your overall estate plan, you can confidently protect your assets.