Does Your Will Control Your Superannuation?

This is the third in our series of articles on the uncertainties of death. Click here to read Part 1.

The Uncertainties of Death Series

Myth: “My Will dictates who gets my superannuation… doesn’t it?”

Wrong!

Your Will does not automatically control your superannuation after you die.

Instead, your superannuation fund’s rules and superannuation law generally determine what happens to your superannuation death benefit.

The fund may pay the benefit directly to an eligible beneficiary. It may also pay the benefit to your legal personal representative for distribution through your estate.

This means you should consider your Will and superannuation arrangements together when planning your estate.

How is superannuation dealt with after you die?

Your Will only controls your superannuation if the fund pays the death benefit to your estate through your legal personal representative.

You might – or might not – want that to happen.

If your superannuation death benefit goes to your estate, your Will can then determine how the benefit passes to your beneficiaries, subject to the applicable law.

However, this may also expose the benefit to potential claims against your estate.

For this reason, you should consider your superannuation separately when reviewing your estate plan.

How do I nominate who receives my superannuation?

If your superannuation fund allows it, you can make a Binding or Non-Binding Death Benefit Nomination.

This nomination tells the trustee who you want to receive your superannuation death benefit.

A valid binding nomination can require the trustee to pay the death benefit to an eligible beneficiary or your legal personal representative.

A non-binding nomination works differently. It tells the trustee who you would prefer to receive the benefit, but the trustee may retain discretion over the final payment.

The rules of your superannuation fund will determine whether you can make a particular type of nomination and what requirements apply.

The Australian Taxation Office explains superannuation death benefits and death benefit nominations.

Who can receive your superannuation after you die?

Depending on your circumstances and the rules of your superannuation fund, your superannuation death benefit may go to:

your spouse or de facto spouse;
your children;
a person in an eligible interdependency relationship with you; or
your legal personal representative, so the benefit can pass through your estate.

Superannuation law determines who can receive a death benefit. Tax law can also affect how the benefit is taxed.

The ATO’s guidance on superannuation death benefits provides further information about eligible beneficiaries and how death benefits can be paid.

What happens if you do not make a death benefit nomination?

If you do not have an effective death benefit nomination, the trustee of your superannuation fund may decide who receives your death benefit.

The trustee must follow the fund’s governing rules and applicable superannuation law.

Where you have no nomination, the trustee may use its discretion to determine which eligible beneficiary receives the benefit. The trustee may also pay the benefit to your legal personal representative for distribution through your estate.

This may produce a different result from the one you expected from your Will.

That is why you should regularly review your death benefit nomination as part of your estate planning.

Why your Will and superannuation need to work together

Your Will forms an important part of your estate plan. However, it does not control every asset you own.

Your superannuation requires separate consideration because your fund’s rules and superannuation law govern the payment of your death benefit.

For example, you may want your superannuation to pass directly to a particular beneficiary instead of going to your estate.

Alternatively, you may want the benefit to go to your legal personal representative so your estate can distribute it under your Will.

The right approach will depend on your circumstances, your intended beneficiaries and the rules of your superannuation fund.

What should I check when reviewing my superannuation?

When you review your estate plan, check whether you:

know which superannuation fund holds your benefits;
have made a death benefit nomination;
know whether your nomination is binding or non-binding;
know who you have nominated to receive your superannuation;
have checked whether your nomination remains valid under your fund’s rules;
have checked that your nomination is consistent with your Will; and
have updated your arrangements after significant changes to your family or financial circumstances.

Review your arrangements after major life events. These may include marriage, separation, divorce, the birth of a child or the death of a beneficiary.

Frequently asked questions about superannuation and your Will

Does my Will control my superannuation?

Not necessarily. Your superannuation fund’s rules and superannuation law generally determine who receives your death benefit.

The fund may pay the benefit directly to an eligible beneficiary. It may also pay the benefit to your legal personal representative for distribution through your estate.

Does superannuation form part of my estate?

Not automatically. Your superannuation can pass to your legal personal representative and then form part of the estate for distribution under your Will.

However, the fund may instead pay the benefit directly to an eligible beneficiary. Your circumstances, death benefit nomination and fund rules will affect the outcome.

What is a Binding Death Benefit Nomination?

A Binding Death Benefit Nomination can require the trustee to pay your superannuation death benefit according to your nomination, provided the nomination remains valid and meets the fund’s requirements.

What is a Non-Binding Death Benefit Nomination?

A Non-Binding Death Benefit Nomination tells the superannuation trustee who you would prefer to receive your death benefit.

However, the trustee may retain discretion over the final payment. The fund’s rules and applicable law will determine how the trustee exercises that discretion.

What happens to my superannuation if I have no nomination?

If you do not have an effective nomination, the trustee may determine who receives your death benefit.

The trustee must follow the fund’s governing rules and applicable superannuation law. The benefit may go to an eligible dependant or your legal personal representative.

Review your superannuation and estate plan

Your Will is only one part of your estate plan. You should also review your superannuation arrangements to make sure they support your wishes.

If you do not adequately deal with your superannuation, the fund trustee may determine who receives your death benefit.

Review your Will and superannuation death benefit nomination together. This can help you identify inconsistencies and ensure your estate plan reflects your intentions.

If your circumstances have changed, you may also need to review your broader estate plan.

Contact us to discuss your Will, superannuation and estate planning needs.

Uncertainties of Death Part 3: Does Your Will Control Your Superannuation?