In New South Wales (NSW) the distribution of your superannuation upon your death is governed by the Superannuation Industry (Supervision) Act 1993 and the rules of your superannuation fund. Meaning that your superannuation benefits and insurance do not automatically form a part of the estate.
It is often to the ‘estates’ advantage to keep superannuation out of the pool of assets when determining an estate.
Here are some general principles:
Binding Death Benefit Nomination:
You may have the option to make a binding death benefit nomination, which specifies how you want your superannuation benefits to be distributed upon your death. This nomination is legally binding on the trustee of the superannuation fund, unless the nominated person is not eligible to receive the death benefit, thereby, making the nomination ‘non-binding’. You can make a binding nomination through your fund, it is important to take note of if this nomination lapses with time and to keep this nomination current.
Non-Binding Death Benefit Nomination:
You can nominate who you’d prefer your account to be paid. However, your nomination is not legally binding. Your superannuation fund trustee will typically have the discretion to determine the distribution of your superannuation benefits. They will usually consider your dependents and other relevant factors.
Dependents and Non-Dependents:
Superannuation benefits are generally paid to your dependents, such as your spouse or de facto partner, children, or any person financially dependent on you. If there are no dependents, the benefits may be paid to your estate.
Tax Considerations:
The tax treatment of superannuation death benefits depends on the recipient. For example, superannuation benefits paid to a spouse or dependent are usually tax-free, while benefits paid to non-dependents may be subject to tax.
Estate Distribution:
If the superannuation benefits are paid to your estate, they will be distributed according to the terms of your will, subject to the relevant laws of intestacy if you don’t have a valid will.
Lump Sum or Pension:
Your beneficiaries may receive the superannuation benefits as a lump sum or as a pension, depending on the rules of your superannuation fund and their preferences.
Legal Advice:
It’s advisable to seek legal advice and consult with your superannuation fund to understand the specific rules and options available. Additionally, reviewing and updating your binding death benefit nomination regularly is important to ensure that your wishes are accurately reflected.
Reversionary nomination for retirement accounts:
If you nominate a reversionary beneficiary, this person will receive regular income payments from your account until the balance reaches $0.
You can nominate any one of the people listed under the Who you can nominate section below, except your legal personal representative. If you nominate a child over 18 years old, they must be:
- permanently disabled, or
- younger than 25 and financially dependent (as defined by Superannuation law) on you immediately before your death
Who can I nominate to receive my death benefits?
- your spouse or partner
- your children (conditions apply for reversionary beneficiary nominations)
- interdependants (someone who lives with you and shares a close personal relationship where one or both of you provide financial and domestic support, and personal care of the other)
- other financial dependants* (such as someone who relies on you financially)
- your estate or legal personal representative (not available for reversionary nominations).
How do I make a nomination?
You can typically download a nomination form from the superannuation fund’s website or alternatively contact the fund to obtain the form.
If you have a SMSF, there will typically be a Binding Death Benefit Nomination form annexed to the back of the SMSF Deed. Otherwise, an estate planning lawyer or accountant can prepare a form for you.
It’s crucial to keep your superannuation details up to date and to consider obtaining professional advice to ensure your superannuation benefits are distributed according to your wishes and in compliance with relevant laws.
The team at Catron Simmons Lawyers are here to assist with any questions you have about Wills and Estates Administration or Planning, please get in touch with us at 0407 171 626.