When a person dies, their superannuation does not automatically form part of their estate. Unless a person has nominated a beneficiary, then the superannuation fund can decide who to pay the superannuation death benefits to. Superannuation death benefits can only be paid to the person’s estate or dependants which includes:
- spouse (married or defacto)
- children (including adult children and step-children)
- a person in an interdependency relationship with the deceased
- financial dependant
Superannuation funds have various types of death benefit nominations you can put in place, which include:
- Non-binding – This is treated as your preference, but the superannuation fund is not bound to pay your death benefits in accordance with the nomination.
- Binding – The superannuation fund must pay your superannuation death benefits to your nominated beneficiaries so long as it is valid at the time of your death. It is not unusual for binding nominations to lapse after 3 years or to become invalid when events occur such as marriage or divorce.
- Non-lapsing binding nomination – The superannuation fund must pay your superannuation death benefits to your nominated beneficiaries so long as it is valid at the time of your death. These nominations do not lapse after a period of time and will remain valid until your death unless they become invalid due to a certain event such as marriage or divorce.
If the rules of the superannuation fund allow, superannuation death benefits can also be paid as a pension to certain dependants rather than a lump sum benefit.
When deciding who to nominate as a beneficiary of superannuation, it is important to consider any tax consequences of superannuation death benefits being paid to a non-tax dependant. Under tax law, a death benefit dependant includes:
- the deceased’s spouse (married or defacto)
- the deceased’s former spouse (married or defacto)
- a child of the deceased under 18 years old
- a person financially dependent on the deceased
- a person in an interdependency relationship with the deceased
Estate planning should not only include the making of a will. As part of your estate planning, it is important to consider your superannuation death benefits and tailored legal advice might be necessary depending on your circumstances.
If you have any questions or need assistance with your estate planning, please call us on 07 3174 5730 or book a free chat online.
