One of your most valuable assets is your superannuation. When you die your superannuation account is paid out as death benefit. If you have life insurance set up through your superannuation, that will be added to your superannuation member account, increasing the amount of your death benefit.
Superannuation does not automatically form part of your estate when you die.
Who can receive your death benefit?
Your death benefit can only be paid to someone that meets the definition of a ‘superannuation dependant’ or your legal personal representative (executor or administrator of the estate). A dependant includes:
- your spouse (including de facto of same or opposite)
- a child, regardless of age (including adopted, step and ex-nuptial)
- someone who is financially dependent on you; and
- someone who was in an interdependency relationship with you.
It is important to note that a ‘dependant’ for tax purposes does not include financially independent adult children. That is, while adult children may be paid from the fund, they may be taxed higher than other dependants.
Binding Death Benefit Nomination (BDBN)
By completing a BDBN, you are directing the trustee of your superannuation fund to pay your death benefit to an eligible superannuation dependant/s, or your estate. If you do not have a BDBN or your BDBN is invalid, such as the BDBN does not comply with the fund’s strict rules or you have nominated an ineligible dependent, the trustee will use their discretion as to who your death benefit will be paid to.
If you complete a non-binding death benefit nomination, the trustee will consider your nomination as an indication, however will need to investigate all potential dependents and use their own discretion to decide which dependant/s is the most appropriate or your estate, to pay your death benefit to.
Therefore, it is important to consider the choice of dependant when making a binding death benefit nomination. This should be made in consideration of your overall estate plan with financial and legal advice.
Disclaimer: This is general information only and should not be relied on as, or substituted for, professional legal advice.