Super benefits and Estate planning
Unlike personally-owned assets, superannuation and pension savings are not paid via a person’s Will in the event of their death. This is why you need to nominate a beneficiary. It is simple to do, and it can significantly reduce the time it takes for your beneficiaries to receive benefit payments.
You can either complete the appropriate nomination form for your super fund yourself or contact us for assistance. If your personal circumstances change eg, marriage, divorce, loss of partner, you need to update your nomination.
Your super fund trustee normally pays your death benefit to one or more of your dependants or to your estate.
A term ‘dependant’ includes:
- Your spouse (this includes same-sex de facto partners)
- Your children
- People with whom you had an interdependency relationship
- People who depend on you financially
Most super funds let you nominate who you want your death benefit paid to, either as a non-binding or binding nomination.
If you don’t nominate someone, the super fund trustee will decide who your money goes to. This can lead to delays and may cause fights in your family.
Binding beneficiary nomination
A binding nomination leaves your super fund trustee with no choice as to who gets your death benefit.
You choose whether the money goes to:
- One or more dependants; or
- Your legal personal representative, who must pay out the money according to your will
Non-binding beneficiary nomination
A non-binding nomination guides the super fund trustee on who will get your super benefits. However, the trustee still has the final say, especially if you nominate someone who doesn’t depend on you. The trustee is not required to follow the instructions in your will.
Who can you nominate as my beneficiary
A valid death benefit nomination can only nominate your legal personal representative and/or your dependants. Your legal personal representative is the person appointed on your death as the executor or administrator of your estate.
Pension reversionary beneficiary nomination
The reversionary beneficiary can only be nominated for your pension account. The nominated person (generally a spouse) will automatically continue receiving the pension after your death.
Advantages and disadvantages of nomination reversionary beneficiary on your account based pension.
|Generally tax-free, or at least concessionally taxed.||Funds are not readily available to pay off non-deductible debts.|
|Earnings and capital gains on pension assets are tax-free (in the fund)||The value of a reversionary pension will count towards a spouse’s transfer balance cap.|
|A death benefit paid as a pension would retain funds in the super environment.|
|The pension simply switches from the deceased to the reversionary beneficiary.|
Tax assessment of pension beneficiaries.
|Age of deceased/dependant||Tax component||Tax treatment|
|If either or both aged 60 or over||Tax-free||No tax payable|
|Taxable- taxed element||No tax payable|
|If both under age 60||Tax-free||No tax payable|
|Taxable- taxed element||Marginal tax rate, but 15% tax offset applies|
As with all things certain rules apply to making a will and you can only nominate certain people. You can read more about wills in our “Estate Planning” fact sheet.
So while a Will is a legally binding document that nominates who should receive what from your estate, it does not apply to your superannuation benefits.
Keep your will updated
Sadly, it’s not uncommon to have issues arise amongst family members left behind after a person’s death, and the problems can be further exacerbated if:
- A person dies without a valid Will (dying intestate);
- A Will is out-of-date;
- A Will fails to take into account all of the assets