Superannuation isn’t just about funding your own retirement; it’s also about providing for your loved ones after you’re gone. But who exactly can inherit your super? Understanding how beneficiaries and death benefit nominations work is crucial to ensure your hard-earned savings end up in the right hands.

What happens to your super when you die?

Unlike other assets, your superannuation doesn’t automatically form part of your estate. Instead, it’s paid out by your super fund according to your death benefit nomination or at the trustee’s discretion.

Who can be a beneficiary?

There are two main categories of beneficiaries:

• Dependents: These are people who were financially dependent on you or had an interdependency relationship with you at the time of your death. This typically includes:
  • Your spouse (including de facto partners)
  • Your children (including stepchildren and adopted children) under 18
  • Any person financially dependent on you
  • Someone with whom you had an interdependency relationship (a close personal relationship where one or both of you provide financial and domestic support, and personal care to the other)
• Non-dependents: These are people who weren’t financially dependent on you, such as:
  • Adult children
• You can also nominate your legal personal representative, then use your will if you want to direct your superannuation be paid to your:
  • Siblings
  • Parents
  • Friends
    
    

Why it matters: Tax implications

The tax treatment of your super death benefits depends on who receives them:

• Tax-free to dependents: Superannuation death benefits paid to dependents are generally tax-free.
• Taxable to non-dependents: Benefits paid to non-dependents could be subject to tax, potentially reducing the amount they receive.
  
  

Death benefit nominations: Taking control

A death benefit nomination is a document that allows you to instruct your super fund on how you want your superannuation death benefits to be paid. There are two main types:

• Binding death benefit nomination: This is a legally binding direction to your super fund, and they must pay your benefits according to your wishes.
• Non-binding death benefit nomination: This is an expression of your wishes, but your super fund trustee has some discretion in how they pay your benefits.
  
  

Keeping your nomination up-to-date

Just like a will, it’s crucial to keep your death benefit nomination up-to-date to reflect any changes in your circumstances, such as marriage, divorce, or the birth of children.

What if there’s no nomination?

If you die without a valid death benefit nomination, your super fund trustee will decide how to distribute your benefits. They’ll generally consider your dependents and any expressed wishes, but the final decision rests with them.

Seeking professional advice

Navigating the complexities of superannuation death benefits can be tricky. A financial advisor can help you:

• Understand your options: They’ll explain the different types of death benefit nominations and their implications.
• Identify your beneficiaries: They’ll help you determine who your dependents and non-dependents are.
• Develop a strategy: They’ll work with you to create a plan that ensures your super benefits are distributed according to your wishes and in the most tax-effective way.
  
  

Don’t leave it to chance

Taking control of your superannuation death benefits is an important part of estate planning. By understanding beneficiaries and death benefit nominations, you can ensure your hard-earned savings provide for your loved ones according to your wishes.

This blog post is intended for general information purposes only and does not constitute financial advice. It is essential to seek personalised advice from a qualified financial advisor to ensure the information is appropriate to your individual circumstances.