What happens to your super when you die?

Hard conversations such as death can lead us to put necessary decisions on the back burner. Admin around your assets such as your will or beneficiaries can offer you peace of mind that everything will be distributed as per your wishes.

Unlike most assets, your super and insurance are treated differently due to being separate from your estate.

Because of this, it’s imperative to stay on top of your admin when it comes to beneficiaries for these assets and ensure that they are valid, so the money is distributed to the correct person.

In this article, we will be exploring what happens to your super when you pass away and the various actions you can take to ensure that the correct people receive your superannuation death benefit.

What is a superannuation death benefit?

In simple terms, a superannuation death benefit is the payment process that occurs when a person with a superfund balance passes away. It’s typically paid to the valid nominated beneficiary of the deceased or can default to the trustee.

Why should I nominate a beneficiary?

Your super and insurance benefits are not considered part of your estate like other assets are. Legally, your super is considered to be held in a trust structure until you are eligible to access it.

If you do not nominate a valid beneficiary, the money will be subject to the appropriate laws at the time of your passing. This may mean the benefits are received by your dependant or your legal personal representative.

 Who is considered a valid beneficiary?

A valid beneficiary includes:

⁃               One or multiple of your children

⁃               Your spouse or de facto partner

⁃               Other dependants that rely on you financially

⁃               Your legal personal representative (otherwise known as your estate)

To be valid, the nominated person must fit the legal description of a dependant and the binding nomination must still be in effect.

Not sure who you want to nominate just yet? You can alternatively decide that the legal personal representative of your estate is your valid beneficiary.

What type of beneficiary nominations are there?

There are 3 different types of nominations for beneficiaries:

⁃               Binding nomination

⁃               Non-Binding nomination

⁃               Reversionary nomination

Binding nomination

A binding nomination means that your super fund legally must pay your balance out to your valid nominated beneficiary.

They are only valid for 3 years before your death and if they fit the eligibility criteria at the time of your passing.

Some super funds now offer non-lapsing nominations so that you do not have to update these again unless you would like to change the recipient of the benefit.

Non-Binding nomination

A non-binding nomination tells your fund whom you’d prefer your super to be paid to but this is not legally binding.

The super fund will take your request into account but will decide the best course of action based on the relevant laws at the time. They will also consider the needs of your dependents at this time.

Reversionary nomination

A revisionary nomination is only accessible to those with an account-based pension.

In the event of your death, your super payments will go to your nominated beneficiary until the balance hits $0, but the balance of your super will remain with the fund.

If you nominate an adult child, they are only a valid nomination if they are permanently disabled or under the age of 25 whilst being financially dependent on you.

This is the only nomination type where you cannot nominate your legal personal representative.

Organising the logistics around succession planning can alleviate a lot of stress and tension for your loved ones in what is already quite a tough time. Reviewing your plan consistently can ensure that your wishes will be executed accordingly and can provide a smoother transition for your family members.

If you need assistance with estate planning and beneficiaries, feel free to reach out to any of our Link Wealth advisers to discuss your personal situation.

General advice disclaimer: The information contained within this post is general in nature and does not take into account your personal circumstances. Please reach out if you wish to discuss your personal situation.