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What happens to super when I die?

in Estate Planning, Superannuation & Insurance by Annemarie Gambera on
What happens to super when I die?

As the old saying goes, nothing is certain except death and taxes. Unfortunately this uncertainty extends to the question of who gets your super when you pass on.

None of us like to think about our mortality and how it may affect our loved ones – let alone the assets we've worked hard to acquire.

Sensibly many of us try to plan for this eventuality, at least in terms of the distribution of our assets, by having a valid will.

It may come as a shock to learn that your super and any insurance benefits attached to it, may not be dealt with in accordance with the wishes expressed in your will.

The trustee of the super fund will decide whether to pay your super to your estate. 

The reason for this is because your super is held ‘in trust’ and must be dealt with in accordance with superannuation laws and the trust deed which governs the operation of your superannuation fund.

Many super funds allow members of the fund to nominate to the trustee where s/he would like the super to be paid.

There are two types of nominations: ‘non-binding’ or ‘binding’. 

A ‘non-binding’ nomination merely provides guidance to the trustee regarding who will receive the super benefits.  A discretion regarding payment of these benefits remains with the trustee of the super fund. In other words, the person you have nominated may or may not receive your super benefits upon your death.

A ‘binding’ nomination directs the trustee to pay the super benefits to the person nominated. This type of nomination takes away the trustee’s discretion.

Problem solved? Uncertainty removed? Not entirely! Most binding nominations are only valid for 3 years from the time the binding nomination is made. You must formally complete a new binding death benefit nomination form every 3 years.  If you do not do this, the binding nomination will become non-binding.

Despite a challenge to a binding nomination can still be made by certain categories of people,  for example, those in an interdependent relationship with you such as a child and/or your domestic partner, this type of nomination provides greater certainty regarding the distribution of your super.

If you don’t nominate any beneficiaries, the trustee of the super fund will normally pay the super benefits to your estate.  The super benefits will then be dealt with according to the wishes expressed in your will.

It is critical that you check your super statement to see if you have a current ‘non-binding’ or ‘binding’ nomination.   You can and always should check with your super fund to confirm what type of nomination, if any, you have and its currency.

Have your say

Comments (3)

Heather Cook - 12 March 2016
If only it was that simple. When you find yourself in a defined benefits scheme, approaching death with terminal cancer, as a single parent, there is no way of having adult children receive pension payments- the equity I have in my super scheme.
I am in this situation, whereby if I had a partner or children studying, my pension would continue to be paid. Alas, unless I register a relationship, my hard earned/worked for indexed pension is lost. The super laws have not changed to reflect the age at which do many children become financially independent.
There is enough pressure on single parents raising kids, but when you only have months to live, this seems another kick in the teeth for older but still dependent kids, to get my pension. It seems to another step in keeping the status quo of economic difficulty in single parent households.
Leanne - 14 March 2016
My late father made a binding nomination leaving his super in equal shares to his wife and my siblings and me. Stepmother challenged as she wanted 100% and the matter ended up in the tribunal where we were told that the prime purpose of super is to support the spouse (despite her having more money than us) and so the bulk of it went to her. My father would have been furious. A few days before his death, he changed his Will, leaving her substantially less than she'd previously been going to get. His marriage was all but over and his new Will reflected that. Didn't matter one iota to the tribunal. Utterly disgraceful.
Wendy - 19 March 2016
I have super in the UK cannot get it here under new laws. Therefore I have to pay $5000 approx to get a self managed fund set up. If I don't and I die and my children are over 21 it gets returned not to my estate but to consolidated revenue! Which is outrageous . Thanks UK.