Who gets your superannuation when you die?

One of the most important decisions you make when you join a super fund has nothing to do with investment. Not sure what I mean? Read on.

This important decision revolves around the question of who to nominate as the beneficiary of your super when you die. It is a critical decision - because if you don't get it right your savings could be given to someone other than your preferred beneficiaries.

Who can be a beneficiary?

Upon your death, subject to the trust deed, your superannuation can only be paid to:

• Your current or ex-spouse (including a de facto spouse)
• Your children (including natural, step, and adopted children)
• A person who was financially dependent upon you at the date of death
• A person with whom you had an interdependency relationship at the date of death
• Your legal personal representative (estate).

Whether a person meets these requirements is tested only at the time of death so it is important to keep any nominations up to date. In some cases, such as dependency or interdependency, keeping records to show the relationship may be helpful.

An interdependency relationship can help to include people who are dependent upon you to qualify as a beneficiary, but meeting the definition can be difficult. It is defined as a relationship between two people (whether or not related) where:

• They have a close personal relationship, and
• They live together, and
• One or both provides the other with financial support, and
• One or both provides the other with domestic support and personal care.

Directing the Trustees

The beneficiaries you nominate when you join a fund are normally only a guide - the trustees of your fund will have the ultimate discretion as to who will receive your super. They will take into consideration any nominations you have made, yet are not bound by your request unless you have made a "binding death benefit nomination".

As experts in Self-Managed Superannuation, we advise SMSF members consider the appropriateness of a 'Binding Death Benefit Agreement' to ensure greater certainty that their superannuation benefits are distributed according to their wishes.

It is also important to note that you can still only nominate someone who is eligible to be a beneficiary. If you nominate anyone else, it will make the nomination invalid. If you want your superannuation to pass to someone else, such as a friend or charity, you should consider nominating your estate as the preferred beneficiary and then deal with distributions in your will.

Regular reviews

It is important to review death benefit nominations regularly and to include full details of your beneficiaries. It's also worth noting that in many funds, binding death benefit nominations may only be valid for three years. If this is the case with your fund, you need to renew the nomination at least every three years to keep it valid. This compares to a Binding Death Benefit Agreement within an SMSF which is perpetual.

Seeking expert advice from an estate planning solicitor is always a good idea to ensure superannuation death benefit arrangements align with your testamentary wishes as set out in your Will.

Rest assured these matters form part of ongoing discussions with our clients. If you have any questions about your personal circumstances or nominations in place then please contact your Adviser at Hewison Private Wealth.