Who gets your superannuation when you die?

You may not have left your super to the person you intended. Strict rules govern how your super is distributed when you die - and its important to follow those rules to make sure your money goes to whom you want

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.

Few exceptions

When a 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 relationship at the date of death
• The member's legal personal representative (estate)

An interdependency relationship is defined as one between two persons (whether or not related by family) where:

• They have a close personal relationship; and
• They live together; and
• One or each of them provides the other with financial support; and
• One or each of them provides the other with domestic support and personal care.

For the purposes of that definition, all of the circumstances of the relationship between the persons must be taken into account, including (where relevant):

• the duration of the relationship; and
• whether or not a sexual relationship exists; and
• the ownership, use and acquisition of property; and
• the degree of mutual commitment to a shared life; and
• the care and support of children; and
• the reputation and public aspects of the relationship; and
• the degree of emotional support; and
• the extent to which the relationship is one of mere convenience; and
• any evidence suggesting that the parties intend the relationship to be permanent;

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.

Regular review

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. This is an important knowledge area when it comes to understanding your money.

Source: Strategy Steps