Superannuation and Your Estate

Estate piggy bank with superannuation written on the side.

For most, superannuation is one of their largest assets.

A person’s superannuation account usually comprises of their member (employment/sacrificed) contributions and policy benefits (such as death benefits).

However, what most people do not realise is that death benefits and superannuation accounts may not form part of a deceased’s estate. Therefore, that money may not be distributed according to your Will.

When considering your Will and superannuation, you should take legal advice in order to ensure you understand the interplay between your Will and superannuation.


Who receives my superannuation benefit when I die?

Generally, the trustee of the superannuation fund will determine who your superannuation account should be paid to.

Usually, this includes one or more of the following people:

  1. Your spouse (including de facto).
  2. Your children.
  3. Any person or persons who had an interdependent relationship with you.
  4. Any person or persons who were financially dependent on you.
  5. Your estate if none of the above apply.

However, you can potentially ensure a far greater level of control around the distribution of your superannuation account with the use of binding nominations, and you should read on to learn more.


Binding Nominations

All superannuation funds differ to one degree or another, but superannuation funds allow members to nominate their preferred beneficiary or beneficiaries. More simply, you may be able to inform your superannuation fund of who is to receive your superannuation account when you pass away.

It is important to remember that commonly there are two types of nominations available:

  • Non-binding nominations: once you have passed away, the superannuation fund trustee may consider your valid non-binding nomination when deciding how to distribute your superannuation account.
  • Binding nominations: if you make a valid binding nomination before you pass away, then once you have passed away the trustee is bound by your valid binding nomination and will distribute your superannuation account accordingly.

While binding nominations can provide certainty, they can also produce results that are unfair or undesirable from a deceased’s point of view particularly if they are not up to date.

It is therefore important to ensure that your binding nominations are up to date and that they are periodically renewed in accordance with the superannuation fund’s requirements. It is also important to ensure any nomination is a valid nomination and there can be tax consequences on account of your nomination and so care must be exercised.

Updating nomination forms is particularly important if the member experiences a change in circumstances such as a divorce or break down of a de facto or other relationship or if the member has a child.


Is a provision in a Will about the distribution of superannuation therefore to be ignored?

Provision in a Will about the distribution of superannuation should not be ignored.

Member’s wishes are relevant but may not be determinative for a superannuation fund trustee when deciding how to divide up a superannuation death benefit.

On drafting a Will it is necessary to consider how the testator wishes for their superannuation to be dealt with as the superannuation fund trustee might exercise its discretion to pay the death benefit to the estate.


Things to remember

When considering a Will, you should remember the following things:

  • Superannuation accounts do not automatically form part of the estate.
  • A superannuation fund trustee might be able exercise its discretion to pay the death benefit to the estate even though it would not generally be bound to do so.
  • You should check that your binding nominations remain valid and up to date. This also applies to non-binding nominations.
  • To update nomination forms when a change in circumstances occurs.

Further Reading:

Understanding How Superannuation and Wills Interact

In most cases, when a person passes away, their superannuation member account benefits will be paid to their beneficiaries as...

What to Consider When Preparing an Enduring Power of Guardianship

When preparing an enduring power of guardianship, there are several important factors to consider: Choosing the right person: The person...

Preparing an Enduring Power of Attorney: Key Factors to Consider

When preparing an enduring power of attorney, you need to consider several important factors to ensure that your wishes are...

All information on this site is general information only, and does not constitute specific legal advice. Please consult one of our experienced legal team for specific advice relevant to your situation.