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Who will get my super money if I should die?

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Could you explain who gets my super money if I should die? I was told that I have to reaffirm who I want my super money to go to every three years — is that true? What happens if you don’t do it?

Your super death benefit is your super account balance when you die, plus the proceeds of any life insurance policy taken out through your super. The law and your super fund’s trust deed govern who can receive a death benefit, but it’s generally restricted to your dependents or your legal personal representative, who is your executor or administrator of your estate. 

Now a dependent is your spouse (including a de-facto partner or a same-sex partner) and any child (including a step-child or adopted child). Dependents also include any person who the Trustee considers to have been wholly or partially financially dependent on you at the time of your death, or any person who the Trustee considers to have been in an “interdependency relationship” with you at the time of your death. This latter category covers close personal relationships between two people who live together, where one or both of them provide for the financial and domestic support and personal care of the other. An example may be two elderly sisters living together. An interdependency relationship can also exist if there is a close personal relationship, but the other requirements can’t be satisfied due to a physical, intellectual or psychiatric disability. Some people think a will takes precedence over super, but the Trustees of your super fund are legally responsible for deciding to whom the death benefit is paid. The governing rules of your super fund via the trust deed determine the manner in which death benefits are paid. Most super funds allow members to make a ‘death benefit nomination’, which is a direction from you to the Trustees of the fund as to whom your benefits are to be paid. However, you can make the death benefit nomination in favour of your legal personal representative (i.e. the executor of your estate), which means the proceeds will eventually be distributed in accordance with your will. Also, if you haven’t made a nomination and there are no dependents, the Trustees will pay your death benefit to your legal personal representative. A ‘death benefit nomination’ is a direction from you to the Trustees to pay your super monies to a nominated beneficiary, or beneficiaries in particular portions. There are two types – a ‘binding death benefit nomination’, which the trustees must follow, and a ‘non-binding nomination’, which the Trustees are not obliged to follow however will generally take into consideration.

A binding death benefit nomination is a direction to the Trustees to pay your death benefits to your nominated beneficiaries. Providing it is valid, the Trustees are obliged to act on your direction – they cannot exercise any discretion. To make this happen, the nomination must be in writing, it must be witnessed by two adults in your presence, neither of whom is a beneficiary, you can only nominate eligible dependents (see below) or your legal personal representative (your estate) as beneficiaries, and it must dispose of your whole super death benefit. Your super fund will generally provide a standard form for you to complete – be very particular about the witnessing requirements. Believe it or not but most binding death benefit nominations lapse after three years from the date which it’s made, and so you must renew or confirm your nomination within this period for it to remain valid. But there is an exception and that’s for Self Managed Superannuation Funds (SMSF) where the ATO has confirmed, that provided the nomination is made in accordance with the SMSF’s trust deed and the deed provides for it, a binding death benefit nomination can continue indefinitely. By the way, if a binding death benefit nomination lapses, it will revert to a ‘non-binding death benefit nomination’, where the Trustee of the super fund has more influence over who gets your money! Generally, the Trustee will pay your death benefit to your legal personal representative — the executor or administrator of your estate — and that’s why you should have a professionally-created will and a quality executor.

Published on: Friday, August 02, 2013

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