05/10/2021
DÓmkara Accountants Pty Ltd - Tax, Accounting & Structuring
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D’Omkara Knowledge October 2021
D’Omkara Knowledge October 2021
What happens to your superannuation when you die
Superannuation is not like other assets as it is held in trust by the trustee of the superannuation fund.
When you die, it does not automatically form part of your estate but instead, is paid to your eligible beneficiaries by the fund trustee according to the rules of fund, superannuation law, and the death nomination you made.
Death nominations:
Most people have a death nomination in place to direct their superannuation to their nominated beneficiaries on their death. There are four types of death benefit nominations:
Binding death benefit nomination:
Putting in place a binding death nomination will direct your superannuation to whoever you nominate. As long as that person is an eligible beneficiary, the trustee is bound by law to pay your superannuation to that person as soon as practicable after your death. Generally, death benefit nominations lapse after 3 years unless it is a non-lapsing binding death nomination.
Non-lapsing binding death benefit nomination :
Non-lapsing binding death nominations, if permitted by your trust deed, remain in place unless the member cancels or replaces them. When you die, your super is directed to the person you nominate.
Non-binding death nomination :
A non-binding death nomination is a guide for trustees as to who should receive your superannuation when you die but the trustee retains control over who the benefits are paid to. This might be the person you nominate but the trustees can use their discretion to pay the superannuation to someone else or to your estate.
Reversionary beneficiary :
If you are taking an income stream from your superannuation at the time of your death (pension), the payments can revert to your nominated beneficiary at the time of your death and the pension will be automatically paid to that person. Only certain dependants can receive reversionary pensions, generally a spouse or child under 18 years. If no death benefit nomination is in place - If you have not made a death benefit nomination, the trustees will decide who to pay your superannuation to according to state or territory laws. This will often be a financial dependant to the legal representative of your estate to then be distributed according to your Will
Is your death benefit valid?
There have been a number of court cases over the years that have successfully contested the validity of death nominations, particularly within self-managed superannuation funds. For a death nomination to be valid it must be in writing, signed and dated by you, and witnessed. The wording of your nomination also needs to be clear and legally binding.
Need more info?
Send us an email and one of our team members will send you the info.
The information contained herein is provided on the understanding that it neither represents nor is intended to be advice or that the authors or distributor is engaged in rendering legal or professional advice.
If assistance is required, professional advice should be obtained.
D’Omkara Accountants Pty Ltd
Tax Agents & Business Advisors
Level 10, 30 Collins Street
MELBOURNE VIC 3000
O: (03) 9579-4450
E: [email protected]
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