With many Australians holding a large portion of their wealth in a super fund, it is vital these assets are passed effectively when the member dies. The benefits paid from superannuation after death are known as ‘death benefits’. It is important to note that these benefits do not automatically pass with the rest of your estate (via a Will). You should therefore consider making appropriate death benefit nominations when considering your estate plan. In this article, our Estate Planning team outlines the way the assets of a self-managed super fund can be passed to beneficiaries on your death.
Under the Superannuation Industry (Supervision) Regulations 1994 (Cth) death benefits may only pass in favour of a member’s legal personal representative (i.e the executor under their Will) or to one of more of their “dependants”. A dependant will include your spouse (whether same sex or de facto), your children (including adult children) and people with whom you have an interdependency relationship.
If you would like your death benefits to go directly to a specific dependant, you can implement a nomination directing the trustee of your superannuation fund to direct death benefits in a certain manner. There are two types of nomination:
If you would like your SMSF death benefit to be paid to someone who is not your dependant (as defined above), you should execute a binding death benefit nomination in favour of your estate. A provision can then be included in your Will bequeathing your death benefits to that person (noting there are likely to be adverse tax consequences where death benefits are passed to a non-dependant). You cannot make a binding or non-binding nomination directly in favour of a person who is not your dependant.
When considering your estate planning and death benefits there are a multitude of options and strategies which are available to ensure that your wishes for your estate are carried out effectively and efficiently after you pass. You should seek professional advice on what the best option may be for you in your particular circumstances.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.