According to the Australian Taxation Office, when someone dies their superannuation is paid directly to their nominated beneficiary. Super funds are not automatically included in your estate and their distribution to dependants or beneficiaries may be decided by the trustee under the rules of the organisation. Payment occurs in most cases to the nominated person/s listed in a superannuation account and is called a “super death benefit”.
“If the rules of your super fund allow it, you can nominate the beneficiary for your super, by making a non-binding or binding nomination.
If the super fund rules allow a binding death benefit nomination, you can nominate one or more dependants and/or your legal personal representative to receive your super.
If a deceased person did not make a nomination, or has made a non-binding nomination, the trustee of the fund may:
- use their discretion to decide which dependant or dependants to pay the death benefit to
- make a payment to the deceased’s legal personal representative (executor of their estate) for distribution according to the instructions in the deceased’s will.”
Depending on how your super is set up, in the event of your death funds may be paid in total or as a death benefit income stream. It is important to note that superannuation funds are treated separately from your estate and are usually paid out by the fund to the nominated beneficiary, if they have been previously nominated, independent of the instructions of your will. Nb: A binding nomination of a beneficiary expires every three years and it is important to regularly check your fund and update if required.
The superannuation organisation trustee may decide to transfer the funds to the person’s legal representative if the nominated beneficiary is non-binding. The deceased persons superannuation funds will then be added to their estate and distributed according to instructions in their will. In the event you have not made a will your estate will be dealt with under the Rules of Intestacy.
Superannuation accounts often include an insurance policy which may include death cover and/or income protection cover and provide the account holder or beneficiary additional funds in the event of a sudden death or illness where they are no longer able to work. Superannuation can also be accessed early if you have been diagnosed with a terminal medical condition. There are no restrictions on the amount withdrawn however the funds may be subject to further rules of the organisation. This early access of funds will require certified documentation by one or two medical practitioners and may be influenced by other rules of the particular organisation. Funds can also be accessed early under compassionate grounds to help pay for medical treatment, equipment, transport, palliative care, housing costs and funeral expenses. Funds may also be accessed for temporary or permanent physical and/or mental incapacity.