09 Oct Super and Death, What happens next?
Super and death, what happens to your super on your passing?
Super and death is a topic that is not often discussed. Most of us are looking forward to the day that we can access our super and very rarely do we consider what happens with it when we are gone. Sure we all probably go and get a will, an enduring power of attorney, an advanced health directive but do we give our super the attention it deserves?
Lets start with a couple of facts. You will does not determine where your super goes. On death the trustee of the superannuation fund that you belong to makes a determination as to where your superannuation is directed to. This is why it is so important to complete a nomination of beneficiary form or a binding nomination form. Lets look at each of these options.
A nomination of beneficiary is not binding on the trustee. It is a loose guide for the superannuation trustee to determine whom to pay the super to. In the absence of a binding nomination this loose guide must be tempered with the trustees process for distributing super proceeds. You see, superannuation can only be left to your legal personal representative (your estate or will) or a dependent under the SIS act. We shall talk more about your dependants later but for now lets stay on topic of nomination forms. Your other option is to complete a binding nomination form. As the name states it is binding, in this case on the trustee provided that the nominations you have made are dependants.
When it comes to super and death, who is a dependent?
A interdependency relationship exists between two or more people falls into 4 categories:
- they have a close personal relationship; and
- they live together; and
- one or each of them provides the other with financial support; and
- one or each of them provides the other with domestic support and personal care.
It is very important when considering your super and death that you take heed of who can be a beneficiary. Remember you can also nominate your estate to receive the proceeds of your super.
You may say, but my super has only a low balance, why should I worry about my super and death?
Consider this, does your super have life insurance? If it does then your super is not as low as you think it is and this is worth designating the way you want. Quite often when considering super and death we forget about the life insurance component of our super which can magnify its value quite significantly.
So far in this discussion we have not gone into how super and death is treated from a tax perspective. In fact this opens up a whole range of complexities that need to be addressed. Factors such as reversionary beneficiaries, pension funds and the components of superannuation need to be considered when calculating out a death benefit to the estate. When planning your super and death options get advice from a trained professional.