What happens to super after death when the deceased estate is located in NSW?
If you are a superannuation fund member and you pass away, the fund will be required to pay your superannuation benefit balance (referred to as super death benefit) to an eligible beneficiary. Your death benefit is either paid out as one lump sum or set-up as an ongoing income stream for the beneficiary. The fund is required to pay your death benefit as soon as practical after death.
1. Who gets the super death benefit?
Your super death benefit will be paid out to the beneficiary you nominated. This nomination is referred to as your Binding Death Nomination.
The nominated beneficiary must be your dependent or a legal representative. Dependants can include your spouse (including de facto and same sex partners), former spouse, children under 18 years of age (including adopted and step children) and anyone who, at the time of death, was financially dependent on you. The most common example of the latter is one of your in-laws living with you at the time of death.
If you have no dependants, the super death benefit will be paid to your Estate and distributed according to either what is outlined in the your Will or, in situations where you dont have a valid Will, the rules of intestacy.
See Also: Changes to the Law of Intestacy (Turnbull Hill Lawyers)
2. What happens if the deceased did not have a binding death nomination?
Without a Binding Death Nomination in place, the superannuation fund Trustee will be required to distribute your super death benefit. The Trustee does this according to a set of trust deed rules. In making a decision about who becomes the beneficiary of your super death benefit, the Trustee is guided by:
- Any non-binding nominations made by you;
- The number of your dependants;
- The relationship between you and each of your dependents;
- The level of dependency between you and each dependent; and
- What is outlined in your Will.
With so many things for the Trustee to consider, coming to a decision about this becomes a lengthy and complicated process that doesnt always necessarily result in an equitable distribution of your super death benefit or a decision that completely satisfies all dependents.
3. What is a non-binding nomination?
A non-binding nomination is a nomination made by you that is not legally binding. Non-binding nominations are still considered by the Trustee, but are not valid. A binding nomination has to be properly documented and renewed every 3 years for it to remain valid. A non-binding nomination has no expiry date and never needs renewing.
4. What are the tax implications of receiving a super death benefit?
For information on tax implications, please see the ATO website or speak to your Accountant.
5. Can there be multiple beneficiaries of a super death benefit?
Yes, however the percentages you allocate to each beneficiary must all add up to 100%. If a nominated beneficiary dies before you do, their allocation would become invalid, thus rendering all of the other percentages invalid because they would no longer add up to 100%. This is why your nominations need to be updated on a regular basis (every 3 years), especially if your circumstances change (marriage, divorce or children).
See Also: The Rights of a Beneficiary
By making a binding death nomination you are removing all uncertainty from the decision-making process and ensuring the Trustee does not distribute your super death benefit unfairly. It will help you effectively manage your estate, assist your lawyer with estate planning and ensure a better tax outcome for one or more nominated beneficiaries. Furthermore, by making a binding death nomination you are stipulating exactly what each beneficiary receives, which helps eliminate costly litigation between dependants following your death.