Understanding Superannuation Death Benefits: What You Need to Know
Superannuation Death Benefits:
When a person dies, their superannuation fund typically pays out their remaining super to a nominated beneficiary. This payment is known as a 'super death benefit.' The rules surrounding superannuation death benefits are crucial to ensure that your hard-earned savings are distributed according to your wishes.
Nomination Options:
Depending on the fund, you usually have the option to nominate a death benefit beneficiary for your super by making either a non-binding or binding nomination. If your super fund allows for a binding death benefit nomination, you can specify one or more dependants and/or your legal personal representative (executor of your estate) to receive your super.
When No Nomination Exists: In cases where the deceased did not make a valid nomination or has made a non-binding one, the trustee of the superannuation fund may use their discretion to decide which dependant(s) will receive the death benefit or may make a payment to the deceased's legal personal representative for distribution as per the instructions in the deceased's will.
Understanding 'Dependants':
Superannuation law outlines who is eligible to receive a death benefit, while taxation law dictates the tax treatment of these benefits. A dependant under superannuation law includes:
Spouse or de facto spouse
Child of the deceased (of any age)
Person in an interdependency relationship with the deceased.
Interdependency Relationship:
An interdependency relationship exists between two people if they meet specific conditions, including having a close personal relationship, living together, providing financial support, and offering domestic support and personal care.
Leaving Super to Non-Dependants:
If you wish to leave your super to someone who does not qualify as a dependant under superannuation law, you can consider making a binding death benefit nomination to have the payment directed to your legal personal representative. This ensures your super is distributed according to your will.
Tax Implications:
For tax purposes, a dependant of the deceased includes not only spouses and children but also former spouses or de facto spouses, and any other person who was financially dependent on the deceased. However, there are limits on who can receive a death benefit income stream, especially concerning adult children.
Death Benefit Income Stream:
A death benefit can be paid as either a lump sum or an income stream, depending on the recipient's age, financial dependency, and disability status. It's important to note that children over 18 years old must be financially dependent on the deceased to be eligible for an income stream.
Applying for a Super Death Benefit:
If you believe you are the beneficiary of a deceased person's super or the legal representative of their estate, you should contact the super fund to notify them of the death and request the release of the super funds.
Understanding superannuation death benefits is essential for effective estate planning and ensuring your loved ones receive the financial support they deserve. By knowing the rules and tax implications, you can make informed decisions about nominating beneficiaries and optimising your superannuation benefits for the future. If you have specific questions or concerns, it's always a good idea to consult with a financial advisor or tax professional for personalised guidance.
