What happens to your super when you die?

Your super might be one of the biggest assets you accumulate over your lifetime. But what happens to your superannuation when you pass away? The answer may surprise you. There are specific laws relating to how your superannuation is paid out and to whom. Undertaking the correct steps to ensure your wishes are met is incredibly important.

While your superannuation account might seem like another bank account, you might be surprised to know that you do not personally own your superannuation account. Instead, your super is held in trust by the Trustee of your super fund.

What is a trustee?

A superannuation Trustee is generally a company which has been established to be responsible for administering a super fund and ensuring its legal compliance.
Unlike other assets which you may have included in your will – such as a car or house – it will be the Trustee that makes the first decision about who will receive your superannuation and any relevant insurance payout (known as a superannuation death benefit) in the event that you pass away.
Unless you nominate your ‘estate’ as the beneficiary of your super, it will not be administrated in accordance with your will (we’ll discuss this more below).

What could happen to my super?

There are three key options when it comes to deciding where your super will go when you pass away.

The first is you can direct it to a ‘valid’ beneficiary. This is someone who must be financially dependent on you at the time of your death or who you are in a financially interdependent relationship.

Alternatively, you can direct it to your ‘estate’ and have a will in place that dictates to whom your superannuation goes.

The third option is the ‘do nothing’ approach, and in this case the Trustee won’t take your wishes into account at all.The implication of this legislation is that there is currently no simple way to nominate a parent, relative or friend to receive your super – unless you are currently providing financial resources to them and they are deemed a ‘valid’ dependant or you meet the definition of being financially interdependent. You will need to have a will in place if this is your wish.

Otherwise, your super will almost always be paid out to your partner and/or any children that you have. Even relatively new relationships, or recently ended relationships could be considered ‘valid’.

Factors such as domestic violence and financial abuse are not taken into consideration by the Trustee. If you are in a relationship that is financially abusive, this could also potentially meet the classification of financial dependence and therefore make it more likely the Trustee will pay out to your partner/abuser.

What is a beneficiary?

A ‘beneficiary’ is a person you nominate to receive some or all of your superannuation death benefit if you die. Or they may be the person who receives it if you don’t have a ‘valid’ beneficiary nominated. You can either nominate ‘your estate’ as a valid beneficiary and your superannuation will be dispersed as per your legal will. Or the following individuals can be nominated to receive your superannuation benefit:

• Spouse (legal and/or de facto)
• Children (including step, adopted, ex-nuptial), of any age
• A financial dependant at the date of death
• A person in an interdependent relationship with you at your death

A Dependant is defined as:

(a) the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship at the relevant time (being in the case of a deceased person the date of their death); and
(b) any other person who, in the opinion of the Trustee, is at the relevant time (being in the case of a deceased person the date of their death) wholly or partially dependent on the person.

You are considered in an interdependent relationship if you are living together, have a personal relationship and have some form of financial or care interdependency.

How to have a say on where your superannuation goes

If you would like to have a say on who receives your superannuation death benefit payment when you die, you can complete a beneficiary nomination form and submit it to your superannuation fund.

Depending on the types of beneficiary nominations allowed by your super fund, which form you complete, and whether your nomination is current at the date of your death, the trustee may be bound to either consider or follow your nomination if you pass away.

At Verve Super we offer two types of beneficiary nominations:

What is a Non-Binding Nomination of Beneficiaries?

A non-binding nomination of beneficiaries is a written request made by you that suggests to the Trustee the beneficiaries that you would like to receive your superannuation death benefit in the event of your death.

The trustee must consider your nomination but is not bound to follow it. The trustee will have the final say on who your superannuation death benefit is paid to (generally one or more of your dependants or your Legal Personal Representative) and in what proportions it will be distributed.

To make their decision, the Trustee will take several factors into consideration, such as personal relationships and the circumstances of those relationships when you passed away. If you have a will the trustee may also take this into consideration, and they may decide to pay your superannuation death benefit to the executor of your estate.

This process can take some time, meaning the allocation of your superannuation death benefit can be delayed while the trustee makes their final decision.

What is a Non-Lapsing Binding Nomination of Beneficiaries?

A non-lapsing binding nomination is a legally binding instruction to the Trustee on the beneficiaries that must receive your superannuation death benefit in the event of your death. So long as the nomination itself is valid, the Trustee is bound to follow it.

The implication of this is that if you nominate someone to receive your super, and pass away 20 years later, as long as that person is still a valid beneficiary, they will receive your super as instructed.

This type of nomination overrides the Trustee’s discretion over your superannuation death payment.

A non-lapsing nomination remains in place until you cancel it or change the beneficiary nomination by completing a new form.

Because of its non-lapsing nature, you are not required to update this nomination in writing every three years, as is the case with some other forms of binding beneficiary nominations.

A non-lapsing binding nomination will become invalid if one of your nominated beneficiaries dies before you do or is found not to be a dependant at the time of your death, or if the nomination was not made directly by you (if it is the Trustee’s policy not to accept nominations through Powers of Attorney, or from anyone other than the member).

If a non-lapsing binding nomination is found to be invalid, it will generally be treated as a non-binding nomination.

How to make a valid Non-Lapsing Binding Nomination of Beneficiaries?

To make a valid non-lapsing binding nomination as a member of Verve Super, please use the non-binding nomination of beneficiaries form. This needs to be printed, signed and dated by you in front of two witnesses, who are also signatories. It then needs to be posted to us.

Verve Super

PO Box 777

Surry Hills, NSW 2010

What if I haven’t nominated a beneficiary?

The Trustee may pay your superannuation death benefit to your estate or use its discretion to decide to which of your dependants should receive the payment and in what proportion.

Even if you are in a relatively new relationship, or a recently ended relationship, your super is likely to be paid to this person before it is directed to your estate and in many cases before it is directed to children.

How do I change my beneficiary nomination?

Circumstances and relationships change – new children are born and partners may separate. It is a good idea to regularly review the information you’ve provided to your super fund regarding beneficiary nominations.

To change your beneficiary nomination you generally need to complete a new form and submit it to your super fund.

Can I check if I have made a nomination?

If you are a Verve member you can visit the member portal and select “Insurance & Beneficiaries” in the menu. Here you will see any valid beneficiary nominations.

You can also check your Annual Member Statement from your super fund, as Trustees are required to include information about any valid beneficiary nominations in place in this statement.

If you have any questions about the nomination of beneficiaries process please contact us via hello@vervesuper.com.au or call 1300 799 482. You may also choose to see professional advice on how to ensure your super benefit is taken care of if you pass away.

This blog is published by Verve Superannuation Pty Ltd (ABN 65 628 675 169, AFS Representative No. 001268903), which is a Corporate Authorised Representative of True Oak Investments Ltd (ABN 81 002 558 956, AFSL 238184), as the Sub-Promoter of Verve Super.

Verve Superannuation Pty Ltd and True Oak Investments Ltd are not licensed to provide personal financial advice. The information contained in this blog, including any financial guidance, is general in nature. You should consider seeking independent legal, financial, taxation or other advice to ensure that your financial decisions are suited to your unique circumstances.

You should read the Product Disclosure Statement, How Super Works Guide, Insurance Guide, Target Market Determination and Financial Services Guide before making a decision to acquire, hold or continue to hold an interest in Verve Super. When considering financial returns, past performance is not indicative of future performance.