Superannuation And Death Benefits

Superannuation isn’t usually covered by your will.

Superannuation and its death benefits are a special, highly regulated kind of asset that’s looked after by your super fund until you reach a certain age and can access it, either as a lump sum or as a pension or both.

If something happens to you, then you need to tell your fund who you want it to go to.

There are only certain categories of people you can choose, though. For example, young people who don’t have a spouse or children can’t choose their brother or sister as a beneficiary.

If you want to make a valid nomination, it has to be one of the categories of people allowed by law: either a spouse or children. And that’s it—there are no other categories.

If you do not want your super to go to your spouse or children because you have no spouse or children, then you must direct that your super be paid to your estate. Your estate will manage your money according to the instructions in your will.

So it’s a good idea to have a will and to make sure that it includes directions for the distribution of your superannuation. If you are young and still working, you probably won’t have accumulated much super yet—for example, if you are twenty years old and have been working for three or four years with an industry fund, you probably don’t have much super yet. However, the death benefit also includes life insurance and most industry funds offer life insurance worth about $200,000-$300,000 (depending on how much you’ve contributed).

If a young person passes away and has not nominated a beneficiary for their superannuation, the fund goes through a long and contentious process that can take up to 12 months. However, if they had put in place a binding nomination stating who they wanted their money paid out to, then there is no doubt as to what will happen. For example, if they had left all of their money to their mother or father, or sibling or whoever, then the super fund must pay it out accordingly. The only way for them to ensure this happens is by leaving a will specifying who they want their money paid out to.

In your middle years, I recommend that you pay into your estate and go through a will to make sure your funds get to your children in a way that you want them to. Unfortunately, most nomination forms allow only first-level nominations. If that nomination is invalid, you won’t be able to name a successor in your will. In order to protect your loved ones, you might want to name a successor outside of your will. Later in life, if you have a spouse, you may name them as your beneficiary, because you want them to receive your super as a super fund.

Another thing I haven’t yet touched on is how superannuation is taxed. However, that’s a big topic. It’s not taxed if it goes to a spouse, or if it goes to children under 18 years old. But if it goes to anyone else, it is taxed. But there’s not much you can do about that. So realistically, the idea is just to make sure everyone gets an equal share, and the tax is accounted for.

So, different stages of life call for different planning. And that’s certainly what we do in our family legacy plans. We not only look at your will; we also look at your superannuation – it’s one of your biggest assets when you take into account your life policy. We want to make sure that that superannuation is also a part of your plan. And we can also provide powers of attorney so that someone you trust can make financial and legal decisions on your behalf if you’re unable to do so yourself.

Superannuation And Death Benefits