Losing a loved one is a difficult time and dealing with complicated financial matters can add to the stress. Understanding what happens to superannuation (super) after someone’s death is crucial to effectively managing these financial matters. This guide provides clear information on the process and options available for managing a deceased person’s superannuation.
What Happens to Superannuation When You Die?
Superannuation is an essential part of each Australian’s financial situation and generally includes both the super account balance and any associated life insurance benefits. After a superannuation member’s death, the benefits of that account can be paid to designated beneficiaries nominated by the account holder.
Nominating Beneficiaries for Your Super
It’s important to nominate beneficiaries for your superannuation before your death. There are two types of nominations:
- Binding Nominations: Legally binding instructions to the super fund on who should receive the benefits.
- Non-Binding Nominations: Suggestions to the super fund trustee on who should receive the benefits.
These nominations significantly affect how superannuation is distributed amongst your estate’s beneficiaries upon death. It’s vital to keep beneficiary details up to date.
How Superannuation is Distributed After Death
Here are the steps taken to distribute superannuation benefits after a member’s death:
- Notification of Death: The super fund must be informed of the member’s death.
- Review of Beneficiary Nominations: The super fund checks if there are any binding or non-binding nominations.
- Trustee Decision-Making: If no binding nomination exists, the trustee decides who receives the benefits.
- Payment Options for Beneficiaries: Beneficiaries can receive the benefits as a lump sum or an income stream.
Tax Implications of Superannuation Death Benefits
The tax treatment of superannuation death benefits varies. Dependents typically receive these benefits tax-free, whereas non-dependents may have tax obligations. For example, a spouse or child under 18 may not pay tax, but a financially independent adult child might face taxes on the super payout. For more information, please refer to the Australian Taxation Office.
What Happens if No Beneficiary is Found?
In Australia, specific regulations govern superannuation death benefits. The Australian Taxation Office (ATO) plays a role in managing these accounts. If no valid beneficiary is found, the funds might be transferred to the ATO and the legal next of kin can claim them.
Managing Disputes Over Superannuation Death Benefits
Disputes among potential beneficiaries can occur. The super fund trustee resolves these disputes, but legal avenues are available if beneficiaries wish to challenge the trustee’s decision. Seeking legal advice is often necessary in such cases.
Planning for the Future
Planning ensures that your superannuation benefits go to the right people. Here are some tips:
- Keep Nominations Up to Date by regularly review and update your beneficiary nominations.
- Understand the Rules of Your Super Fund.
- Seek Professional Advice for comprehensive estate planning.
Conclusion
Understanding the distribution process of superannuation benefits is essential. By being proactive and keeping your nominations up-to-date, you can ensure your wishes are honoured.
For personalised assistance, please send an email to enquiries@billwill.com.au and we can put you in touch with one of our estate planning partners.
Here are the links to the websites of some of the largest banks in Australia with information about their deceased estate and notification services:
