Who gets your super when you die?
For many people, their super is one of their most significant assets. But many people do not understand what happens to their super benefits (called death benefits) when they die.
A case reported last week in the Herald Sun, whereby Daniel Leverton died suddenly, leaving less than one-quarter of his estate to his two young daughters, illustrates how it can go wrong if you fail to deal effectively with your death benefits.
Here are the key points to know when dealing with your death benefits.
Number 1. How do I nominate a beneficiary?
Your will does not deal with the payment of your death benefits.
You can nominate who you would like to receive your death benefits by completing the beneficiary nomination form prescribed by your super fund.
There are two types of nominations – non-binding and binding. Some super funds only allow non-binding nominations while others give you the choice of making either a non-binding or binding nomination.
A non-binding nomination merely nominates the beneficiary you would like to receive your death benefits. As its names suggests, it is not binding! This means that ultimately the trustee of your superannuation fund will decide who receives your death benefits.
A binding nomination provides more certainty as the trustee of your super fund is bound to pay your death benefit to the person you have nominated. However, most binding nominations lapse every three years.
If you make no nomination the trustee of the super fund will decide who receives your death benefits.
Number 2. Who can I nominate as a beneficiary?
Death benefits can only be paid to a dependant or your legal personal representative (LPR).
A dependant is:
a spouse (including de facto spouse),
a child of any age (including a step-child),
someone in an independency relationship with you (a close personal relationship between two people who live together, where one or both provides financial, domestic and personal support to the other), or
someone who is financially dependent on you.
You can nominate as many dependants as you want, in whatever proportions you like (to a total of 100%).
If you nominate your LPR then your death benefits will be paid to your estate and will be distributed in accordance with your will.
If you nominate someone who is not a dependant then your nomination is invalid. Many people nominate their parents, siblings, nephews, nieces, or close friends not realising that the nomination is probably invalid.
Having a valid and up-to-date nomination in place for your super death benefits is a crucial part of any estate plan.
For further information or advice please contact:
Daniela Pavlovic
Special Counsel
T 5225 5227
M 0417 014 455
E dpavlovic@ha.legal
