The distribution of superannuation following a member’s death is a relatively complex area of the superannuation system. Superannuation monies do not automatically form part of a deceased’s estate. The trustee of the superannuation fund has the responsibility to pay out any entitlement in accordance with the governing rules of the fund and any applicable legislation, including the Superannuation Industry (Supervision) Act 1993 (Cth) and associated regulations.
Pursuant to Reg 6.22 Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations), a trustee can only pay a death benefit to a member’s dependent(s) and/or their legal personal representative. If you do not nominate a beneficiary, then the trustee of the superannuation fund will exercise its discretion, subject to the rules of trust law and regulations to determine who receives your superannuation death benefit.
If you nominate a beneficiary, this can help to eliminate any ambiguity around how your benefits should be administered after your death.
Nominations can be binding or non-binding.
This is a written direction from a member setting out how they wish some or all of their superannuation death benefits to be distributed. If this nomination is valid at the time of the member’s death, the trustee is bound by law to follow it.
It is important to keep binding nominations up to date. Should your personal circumstances change, and you die, the trustee is bound to follow the directions of a binding nomination.
Lapsing or non-lapsing
Binding nominations can be either be lapsing or non-lapsing. A lapsing nomination is valid for a maximum of three years and will lapse if not renewed. A superannuation fund may also offer non-lapsing nominations. A non-lapsing nomination will remain in place unless the member cancels or replaces it with a new nomination.
This is a written guide by a member about how they wish some or all of their superannuation death benefits to be distributed after their death. However, even if the nomination is valid at the time of the member’s death, the trustee retains ultimate discretion to distribute the superannuation death benefits to the deceased’s dependants or estate.
There is another type of nomination for those receiving a super pension or income stream. This nomination is called a reversionary nomination.
With a reversionary nomination you have the ability make an election that your pension or income stream will revert or be directed to a particular beneficiary upon your death. This beneficiary is usually your partner or spouse.
Who can be my beneficiary?
Your nominated beneficiary will generally receive your superannuation balance and any death cover paid out by the insurer upon your death.
A beneficiary of your superannuation must be a dependent or your legal representative. You can nominate one or more beneficiaries if your super fund allows it. Beneficiaries, subject to meeting eligibility requirements, may include:
- your spouse or partner
- your children – including any step-child, any child recognised by you as an adopted child and any child of yours born after your death
- anybody financially dependent on you when you die
- your estate or legal representative – known as an executor.
If you nominate your estate or legal representative, you can then specify in your Will how to distribute your super money. It’s important that the information stated in your Will is up to date, so your legal representative pays out your super money as per your instructions.
Apart from the nominated person being a dependent or legal representative, for a nomination to be valid there are a few additional requirements.
Pursuant to Reg 6.17A SIS Regulations, the nomination:
- must be in writing
- must be signed and dated
- must be appropriately witnessed by two disinterested adult witnesses (this applies for binding nominations only)
- must be received by the trustee.
Most superannuation funds have death benefit nomination forms on their website to assist you to complete a valid nomination.
- Make sure your nominations are valid
- Keep your nominations up to date. For example, if you nominate your spouse and you separate, but have not yet obtained a divorce, the nomination remains valid and binding unless the nomination has been amended, revoked or has expired
- Let your beneficiaries know they have been nominated as the trustee requires a certified death certificate to start to process a death claim.
Issued by Diversa Trustees Limited (ABN 49 006 421 638), (AFSL No 235153).
This article does not constitute financial advice and does not take into consideration your personal objectives, financial situation or particular needs. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.