Who receives my superannuation benefits when I am no longer here?
Recently, a client came into our office wanting to have access to his wife's superannuation death benefits. What unfolded is a classic scenario. The deceased's wishes might not be honoured because of the provisions of the Superannuation Industry (Supervision) Act 1993 which affect the distribution of his wife's superannuation.
Below are some essentials that every individual should be aware of when dealing with superannuation and what to do to best control where your money goes.
Death Benefits – what are they?
Death benefits are a payment to a person from another person's superannuation fund following their death.
Who decides who receives my death benefits?
It is within the trustee's discretion to decide who is entitled to receive the payment upon the member's death. Nevertheless, there are measures that you can take to guide the trustee in their decision.
Does the trustee apply any rules in deciding who receives my benefits?
Yes. The trustee would first consider whether there are any binding and/or non-binding nominations made by the deceased member prior to their death.
a. What is a binding nomination?
For the nomination to be binding, there are certain conditions that the nomination needs to meet before it can bind the trustee. As different funds have different rules on whether or not you have a binding nomination, check with your super fund whether you have one as there is usually a specific form that must be filled out. Once you are sure that you have a binding nomination, you need to update this every three years to keep it valid. If there are any personal circumstances that have changed since your nomination or since your update be sure that your binding nomination is updated.
Once the trustee is satisfied with the existence of a binding nomination, then that beneficiary will be the recipient of the death benefit payment.
b. Is a hand-written note prior to the death of the deceased a binding nomination?
Each super fund has their own rules as to what would form a binding nomination. However, generally it must contain at least the following:
- must be dated and signed by the deceased;
- must be witnessed by at least two witnesses and executed by the two witnesses; and
- must be forwarded to the trustee, who has informed the deceased about the implications of making such an election.
If the hand-written note does not satisfy the above, then it is unlikely to be binding.
c. What if I only have a non-binding nomination?
If there is a non-bonding nomination, which most individuals have without being aware (which in most cases would be your once binding nomination which may be several years old and therefore become non-binding) it provides the trustee with an indication of how the member would have liked to have the death benefits distributed. The reason it is an indication is because the trustee is able to look at the changed circumstances and decide who should now receive the distribution.
d. What if I don’t have any nominations?
If you have not made any form of nomination with your super fund, the trustee needs to consider whether there are any legal representatives or dependants of the deceased member. The trustee may also consider this when you only have a non-binding nomination and consider the changed circumstances in your personal relationships.
A dependant may include (subject to certain conditions set out in Superannuation Industry (Supervision) Act 1993 and the Income Tax Assessment Act 1997) a spouse, or former spouse, a child aged under 18, any other person whom the deceased had an interdependency relationship or any other person who was financially dependent on the deceased.
i. What if I have more than one child, but only one is under 18?
The trustee would consider all dependants and elect those whom they think were financially dependant on the deceased member at the time of their death. Therefore, if there is one child over 18, the trustee would still consider whether that person is employed and financially dependant on the deceased. However, as a general proposition, the law considers that any child under 18 is automatically dependent on their parents including the deceased parent and will receive the death benefit unless there is another dependant more entitled such as the spouse of the deceased.
ii. What if I don't have any dependants when I pass away?
If the deceased member has no dependants at the time of death, the death benefits will be paid to any natural persons selected by the trustee of the fund. This is why it is important that you consult a professional within our team to guide you on how best you can protect your superannuation so that it is distributed among those you nominate.
The money one accrues in superannuation can be quite significant. Do not leave its distribution to chance. Should you have any questions about your superannuation please do not hesitate to contact our office.
DOROTA BRYKS
Lawyer
Corporate & Commercial
