One of the most important decisions you make when you join a super fund has nothing at all to do with investment. It revolves around the question of who to nominate as the beneficiaries of your super when you die.
It is a critical decision – because if you don’t get it right your savings could be given to someone other than your preferred beneficiaries.
Strict rules govern how your super is distributed when you die – and it’s important to follow those rules to make sure your money goes to whom you want.
What happens to your super after you die?
When a super fund member dies, subject to the trust deed, his or her superannuation may only be paid to:
- The member’s spouse (including a de facto spouse, whether same sex or not)
- The member’s children
- A person who was financially dependant on the deceased member at the date of death
- A person with whom the deceased member had an interdependency (for a definition speak to one of our planners) relationship at the date of death
- The member’s legal personal representative (estate)
A determination can take into account a statutory declaration signed by one of the persons to the effect that the person is, or (in the case of a statutory declaration made after the end of the relationship) was, in an interdependency relationship with the other person.
The beneficiaries you nominate when you join a fund are normally only a guide – the trustees of your fund will have the ultimate discretion as to who will receive your super. They will take into consideration any nomination of beneficiaries that you have made, but are not bound by your request.
The only exception is where your super fund allows you to make a “binding death benefit nomination”. This is a nomination that the trustees are obliged to follow. You may only nominate a spouse, child, someone who you held an interdependency relationship with, or a financial dependant.
If you want your superannuation to pass to someone else, such as a friend or charity, you should consider nominating your estate as the preferred beneficiary of your superannuation entitlements. You superannuation will then be distributed according to the terms of your will – you would need to nominate such people or bodies as beneficiaries of your will.
It is important to review death benefit nominations regularly and to include full details of your beneficiaries – including their relationship to you, their full name and their address.
Keeping your super fund trustee informed of any changes to your beneficiaries – or changes to their personal details – will make the task of distributing your super much less complex for all involved.
It’s also worth noting that binding death benefit nominations are only valid for three years – so make sure you update your nomination regularly.
To be valid, a binding death benefit nomination must be:
- Signed by you; and
- Witnessed by two persons who are not beneficiaries of the nomination; and
- Contain a declaration signed and dated by the witnesses that the nomination was signed in their presence.
Who to leave your superannuation to (and how) can be a complex question that can involve tax, social security and other financial considerations. You are well advised to seek professional assistance from your financial planner in this area.
We would be very pleased to assist you with this essential task. Contact us today for more info.