Many people who are writing their will and beginning to decide how to distribute their estate do not know that the superannuation proceeds are not technically part of their estate. It is only part of the estate if the trustee of the fund pays the money into the estate of the person who passed away. It is up to the discretion of the trustee of the super fund to do this – and they may choose not to. Unfortunately, the money may be distributed in a way in which the deceased may have disapproved, and this may lead to beneficiaries having to apply for superannuation claims. It’s important to remember that you may have a substantial life insurance policy as part of your superannuation, and therefore even if you think it’s not worth much, that it may be a significant asset worth tens or hundreds of thousands of dollars.
Superannuation Proceeds After Your Death
When a person passes away, the trustee of the fund has an absolute discretion in paying the superannuation proceeds to one or more persons who are defined under superannuation law as “dependents”. The word “dependents” in fact means the following persons
(a) A spouse;
(b) A child below or over the age of 18 years;
(c) A person who is actually in a relationship of dependency with the member of the fund;
(d) A person who is actually in a relationship of interdependency with the member of the fund.
However, if a valid binding nomination has been listed and put in place, then the trustee will distribute the funds to that person, and not much can be done to contradict these actions. Unfortunately, many people do not create a valid binding death nomination. All potential beneficiaries may make an application to the trustee of the superannuation fund to have the proceeds paid to them. Anyone who is eligible to claim a superannuation death benefit of someone who has passed away should make contact with the superannuation fund as soon as possible and seek independent advice if required.
In many cases, a self-managed superannuation is beneficial, as you may then reduce the risk of having superannuation claims occur after your death. Other advantages of self-managed super funds include flexibility, control and the ability to make changes as your circumstances change.
Maintaining your super fund
Before you begin to nominate those who you want to receive money from your super, it is important to know that if you have a physical or mental condition which causes you to permanently cease employment you may be entitled to access your superannuation prior to reaching retirement age. If you become terminally ill or experience extreme financial hardship you may also apply to have the proceeds of your superannuation made available to you.
Nominating your dependants
To ensure that your superannuation is given to the right person, you can nominate people you believe should inherit it. However, do not make this decision lightly. Your superannuation may include a large sum of money, and it should be important to remember that someone may unwisely spend your money or properly invest. it’s also important to remember that your circumstances will change throughout the course of your life, such as marriage, divorce and the birth of new children and grand-children.
However, before you begin thinking of nominations, it is important that you contact your superannuation fund to see how your super is structured. From this information, it may be wise to create a binding death benefit nomination. With a binding death benefit nomination, you can list who you wish to receive your superannuation proceeds once you pass away. Even after you create this nomination, ensure that you are reviewing this nomination regularly for it to remain valid.
Once you contact your superannuation fund, you may discover that you are not permitted to create a death benefit nomination. In this circumstances, this may mean that your superannuation proceeds will form part of your estate. However, ensure that you ask your superannuation if this is the case and ask questions about what will happen to your super in the event of your death. In circumstances where there is no binding death benefit nomination, or a nomination is not valid, the trustee of the superannuation fund determines who receives the proceeds of your superannuation. Eligible beneficiaries for superannuation benefits are the spouse, child, financial dependent or the executor of the estate of the person who has passed away. All potential beneficiaries may make an application to the trustee of the superannuation fund to have the proceeds paid to them.
If you are unsure on how to list your dependants or create a death benefit nomination, ensure that you contact your super fund. However, if someone has recently passed away and you believe that you are a dependant, then it’s important to seek specialist legal advice. We are able to assist people who fall within the definition of a dependent for superannuation claims purposes. Firstly we can assist in an application to the trustee of the superannuation fund to ask the fund to exercise its discretion to make provision. Further, where the matter escalates, and there is a dispute, we are able to assist our clients in an application to the Superannuation Complaints Tribunal.
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