Superannuation & Your Estate - Why a Will is not always sufficient for Super

Why isn’t my Super included in my Will?

Your Super doesn't automatically become part of your estate and cannot be included in your Will. This is because it’s governed by its own set of legislation, the Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) which sets Super apart from other assets, like your house or car.

What happens when I pass?

Your Super balance will continue to be invested in accordance with your investment option(s) until the Super Fund is notified of your passing. 

Following notification of your passing and depending upon the rules of your Super fund, your units held by the Super fund will usually be converted into cash, ready to be transferred to a Dependant or your Legal Personal Representative.  

What is the definition of a valid Beneficiary?

A valid Beneficiary is either your Dependant(s) and/or your Legal Personal Representative.

A Dependant is defined as a Spouse of a person (including De-Facto), any child of the person, and any person with whom the person has an Interdependency Relationship.

An Interdependency Relationship is defined in the SIS Act to include: “Two persons, whether or not related by family, who:

1. Have a close personal relationship; and

2. They live together; and

3. One or each of them provides the other with financial support; and

4. One or each of them provides the other with domestic support and personal care.”

A Legal Personal Representative is defined as “the executor of the Will or administrator of the estate of a deceased person, the trustee of the estate of a person under a legal disability or a person who holds enduring power of attorney granted by a person.”

What if I want my Super to be included in my Estate and Will?

If you want to leave your Super death benefit to someone who is not your Dependant, or would prefer to have your Super distributed in accordance with your Will, you could consider nominating your Legal Personal Representative as a Beneficiary. 

Nominating a Legal Personal Representative means that your Super death benefit monies will form part of your estate and can be distributed according to your Will (or according to the relevant intestacy laws if you don’t have a Will) provided that the Beneficiary Nomination is in the valid format required by the Super Fund. 

What if someone doesn’t agree with a Nominated Beneficiary or a Super Fund’s determination?

A person can petition for a Super Fund to consider their claim for distribution of a portion or all of your Super funds following your death, which can be considered if they can evidence that they are a valid Beneficiary. 

If a person is not satisfied with a Super fund’s ruling on Super death benefits, they can make a complaint with the Super fund. If the person is still not satisfied with the Super fund’s ruling following a complaint, they may decide to make a further complaint to the Australian Financial Complaints Authority (AFCA).

If there are objections to Nominated Beneficiaries and/or a Super fund’s determination on death befits, this may delay the processing of the Super death benefits. 

As such, you may want to consider nominating your Legal Personal Representative if you have specifically excluded Dependants in your Will for any particular reason, to ensure your Super funds are distributed consistently with the directions of your Will.

What is the importance of having valid Nominated Beneficiaries?

Valid Nominated Beneficiaries streamline the process of distribution of Super death benefits. They also allow for you to distribute the Super death benefits on a proportionate basis of your preference e.g. 50% of the Super death benefit could be distributed to your spouse and 2x25% of your Super death benefit could be distributed to your two children.  

If you do not nominate Beneficiaries, or if you nominate Beneficiaries who are not considered valid under the law, this can lead to delays in the processing of your Super benefits by the Super Fund. 

Delays in processing can mean that your loved ones may be left to foot bills such as funeral costs, mortgage costs and any other liabilities of your estate without timely access to funds to assist in payment. 

What are the types of valid Beneficiary Nominations?

Super funds will have there own internal rules about valid Beneficiary Nominations. However, the two most common Beneficiary Nominations are:

1. Binding Beneficiary Nominations; and

2. Non-Binding Beneficiary Nominations.

As their names suggest, the Binding Beneficiary Nominations are intended to be binding upon the Super Fund (provided they are valid), and the Non-Binding Beneficiary Nominations are not intended to be binding upon the Super funds (more of a guide as to what a person’s wishes are).

Further, Binding Beneficiary Nominations will need signed by the Super fund member using the specific forms of the Super fund and will need to be signed and witnessed by two witnesses, who are not beneficiaries under the Beneficiary Nomination (similar to a will). 

Importantly, many Super funds have rules in place which mean that Binding Beneficiary Nominations expire after a certain period (the most common period being every three years), so you will need to re-sign and witness your Binding Beneficiary Nominations regularly.

Non-Binding Beneficiary Nominations are unlikely to have expiration dates.

What if I have insurance in my Super?

When your Super Fund is notified of your passing, if insurance is held in your Super account, the Super Fund will notify the insurer of your passing and provided sufficient evidence is provided, the insurer will pay the insured amount for death coverage into your Super fund account. 

These monies will be added to the total of your Super death benefit.

What happens if I have multiple Super Accounts? 

If you die and have multiple Super accounts, requests will need to be made to each of your Super funds to have the death benefit monies released. As such, it is important to have valid Beneficiaries Nominated for each of your Super funds. 

If you don’t know how many Super fund accounts you may have, a list of your Super fund accounts can be found if you log in to the ATO website.

What happens if I have a Pension Account with a Super fund or a Defined Benefit Account?

Often Pension Accounts and Defined Benefit Accounts have an ability for a Reversionary Beneficiary Nomination, which means there is an ability to have a Dependant, upon your passing, receive the benefits you received from the Account. 

This Reversionary ability is strictly dependant upon the rules of the Pension Account and/or Defined Benefit Account. There may also be other complex rules which differ to regular Super fund accounts. 

Please get in touch with us if you’d like for us to assist you with reviewing the rules of a Pension or Defined Benefit Account.  

What happens if I have a Self-Managed Super Fund (SMSF)?

The requirements for a SMSF are similar to those of a Super Fund, in that you can only pay your death benefit funds to a Dependant or your Legal Personal Representative. 

However, you can establish rules in the SMSF Trust Deed to ensure that Funds are automatically paid to particular Dependants and/or your Legal Personal Representative in the event of your passing.

Please get in touch with us if you wish to ensure and/pr change the rules of your SMSF Trust Deed to allow this.

How do I ensure my Super death benefit funds and any life insurance is passed on to my loved ones?

1. Complete a valid and witnessed Beneficiary Nomination which nominates a Dependant or Dependants and/or your Legal Personal Representative in accordance with legislation and your Super fund’s rules; and

2. Regularly update your Binding Beneficiary Nomination every few years, depending on the rules of your Super fund and every time you update your Will.

If you need any assistance in preparation of a valid Nominated Beneficiary form, your Will, administering an estate, advice relating to complex estate planning, or advice regarding Superannuation and/or Defined Benefit claims, contact our experienced team led by Brendan Tynan-Davey & Wayne Davey @ Tynan Davey via info@tynandavey.com.au.

Disclaimer: The information contained in this article is provided as general information only. It is not intended to be legal advice and it should not be used or relied on as legal advice.