Understanding Superannuation: What Happens When Someone Passes Away

When an individual passes away, their superannuation generally isn’t included in their estate. If the person has not designated a beneficiary, the superannuation fund reserves the right to decide the recipient of the superannuation death benefits. The superannuation death benefits can be allocated to the following :

• A spouse (legally married or in a de facto relationship);
• Children (comprising adult and minor children and step-children);
• An individual sharing an interdependent relationship with the deceased;
• A financial dependant; and
• The deceased’s legal personal representative (the estate).

There are a number of different types of death benefit nominations that you can arrange with your superannuation, including:

Non-Binding

• This is considered a representation of your preference, however, the superannuation fund is not legally obligated to distribute your death benefits in alignment with your nomination.

Binding

• The superannuation fund is required to disburse your superannuation death benefits to the beneficiaries you have nominated, provided the nomination is valid at your time of death. It’s not uncommon for binding nominations to become invalid after a 3-year period or due to life events such as marriage or divorce.

Non-Lapsing Binding Nomination

• The superannuation fund must allocate your superannuation death benefits to the beneficiaries you have nominated, provided the nomination is valid at your time of death. These nominations do not expire with time and will remain valid until your death unless they are revoked or invalidated by a particular event such as marriage or divorce.

If the superannuation fund’s rules permit, superannuation death benefits can alternatively be disbursed as a pension to specific dependants rather than a lump sum benefit.

When choosing a superannuation beneficiary, it is essential to contemplate any potential tax implications of superannuation death benefits being allocated to a non-tax dependant.

As per tax legislation, a death benefit dependant could be:

• The deceased’s spouse (legally married or in a de facto relationship)
• The deceased’s previous spouse (legally married or in a de facto relationship)
• A child of the deceased under 18 years old
• A financially dependent person on the deceased
• A person sharing an interdependency relationship with the deceased

It is important to note that estate planning is not confined to the creation of a Will. Your superannuation death benefits must be taken into account as part of your estate planning, and depending on your specific circumstances, specialised legal advice may be required.

For any queries or assistance regarding your estate planning, contact Cairns Wills & Estates for expert advice.