Who is the Beneficiary of your Super Fund?

Written and accurate as at: 15 January 2013

This is a pretty simple question, however it might not have a simple answer.

When was the last time you looked at your superannuation statement and reviewed who the beneficiary of your superannuation fund is?

Ensuring the proceeds of your superannuation go to who you want upon your death is relatively simple yet often overlooked.

Importantly, superannuation differs from most other investments as it is not distributed via your Will when you die. If you want to review what assets are distributed via a will, read this section of the Estate Planning learning module.

Instead, you nominate your desired beneficiary for your superannuation through your superannuation fund. There are a number of allowed beneficiaries which include for example a spouse, your Estate, and other people who are considered financially dependent upon you.

Importantly your superannuation balance includes both your investment balance and any life insurance held within the super fund, meaning that if you have a low investment balance you may still have a large superannuation Death Benefit depending on the amount of insurance you hold within the fund.

You can make a nomination which indicates who you would like to receive your superannuation death benefits. Even with such a nomination, the trustee of a superannuation fund still has discretion to decide who will receive your superannuation benefit on your death. Please note it is rare that this decision would be in conflict with the nominated beneficiary, but there are no guarantees.

Importantly, some superannuation funds have an option to make a ‘binding nomination’. In short, a binding nomination places a legal requirement to pay superannuation benefits according to your directions, thereby removing the discretion otherwise available to the trustee. Due to this power, it’s important to understand what the implications are of any binding nominations you make. You can read more about binding nomination’s here and we would also suggest you seek personal advice if you haven’t done so already.

One implication that warrants serious consideration is the tax implications of payments from superannuation. There can be different tax liabilities depending on which beneficiary you choose, meaning that there are a variety of ways to best manage the distribution of your assets, of which superannuation is only one.

Tax and superannuation can be a complex area, but if you are adequately interested you can read more here. We also suggest you obtain personal advice in this regard.

If you haven’t considered the passing of your Superannuation Death Benefits, or it has been a while since you have done so, we suggest you take the time to do so sooner rather than later.

This is especially important if you have had a change in circumstances such as getting married, having children or becoming divorced.

Paying too much unnecessary tax is like burning money in this video.

If you are reviewing your nominated beneficiary on your superannuation account, it would be worth reviewing your total estate plan. You can start with this article.