Your self-managed, industry or retail Superannuation contributions and benefits are held in a trust, which in turn is controlled by a Trust Deed.
This Trust appoints people (Trustees) to act for its members, which in the case of your Super Fund, is you.
Most Super Funds accept your nomination of a beneficiary (the person/s of your choice) when you join the fund, however, your nomination on that form or on the website is not binding and therefore does not bind the Trustees to pay to the beneficiary/s you have nominated. The Trustees will give that beneficiary consideration, however, they will exercise their absolute discretion when paying the super in the event of your death, and may take into consideration competing claims from family members, separated spouses and defacto partners.
The law in Australia, however, limits the lawful beneficiaries who can benefit from your Super when you die. It is a very small class and comprises:
- Your spouse (current or defacto)
- Your children
- The Legal Personal Representative of your estate (the Executor in the Will or the Administrator appointed by the Court)
- Any other person who is financially dependent on you at the date of your death
- Any other person with whom you have an interdependent relationship at the date of your death.
In addition to the class of people, the taxation which may apply to the payment will rely on a set of conditions that apply to each beneficiary.
To direct the Trustees to pay to the beneficiary/s of your choice, and therefore overriding the Trustees discretion, you must complete a Binding Death Benefit Nomination, which is usually provided by the Super Fund on request, or you may obtain it from their website. You complete this form, (making sure that the % you allocate to a number of people always totals 100%) and have your signature witnessed by two independent, adult witnesses, who do not benefit from your nomination. You must then send the completed form to your super fund. When received and accepted by the Super Fund, they MUST pay to your nominated lawful beneficiary/s.
And just when you think that will solve the problem, the Binding Death Benefit Nomination only operates for 3 years and must be renewed if it is to have an effect. Your family situations change over time and, for example, in the event you are widowed, you would need to then consider a new Binding Death Benefit Nomination, if your spouse was the nominated beneficiary at the time you were widowed. In some Funds, a Non-Lapsing Binding Death Benefit Nomination is available. Your Fund will advise you if this is available.
And still more food for thought, you may want to direct your Attorney, in your Enduring Power of Attorney document to renew your Binding Death Benefit Nomination in the event you have Super at the time your Enduring Power of Attorney takes effect and/or you lose capacity.
And finally, what if your super is paid as a pension when you die?
If you have nominated a reversionary beneficiary who is your dependant, they will continue to receive your pension payment. If you have not nominated a reversionary beneficiary, the Trustees will terminate your pension and may pay it according to any Nominations they have accepted prior to your death, or under the terms of the Super Fund’s Trust Deed.