What happens to your super if you die? An easy step now to save your family some grief

04 Jul 2017

By David Rose

A recent news release from the Superannuation Complaints Tribunal (SCT Quarterly - Q1 2017) highlighted the importance of nominating beneficiaries of your super account.

In the first quarter of 2017, the SCT received 120 complaints relating to death benefit distributions.

From the date a complaint is made, it takes an average of 405 days to be resolved.

How would your family cope if they had to wait 405 days for a final decision on who will receive your super?

Over my career I have dealt with many grieving beneficiaries who were financially impacted and desperately needed the super proceeds to be released. Thankfully, in most cases the process was short because the deceased individual had taken the time to nominate beneficiaries to their super account.

I remember one case where the deceased individual did not nominate beneficiaries and the non-working spouse was unable to obtain the proceeds until other beneficiaries (financially independent adult children) waived their rights to a claim. The process took many months.

At the same time, I was working on a super fund death claim where the individual had nominated his financially independent adult daughter as his beneficiary. The benefits were paid within 30 days.

How do you make a beneficiary nomination?

An extended waiting period for proceeds can cause your loved ones financial and emotional stress. The good news is that you can spare them this added grief by simply taking a few minutes to fill out a form.

To avoid financially impacting your family, review your super account and make sure you have a valid beneficiary nomination that reflects your wishes. If you don’t, take the time to do so. Most super funds have forms that you can easily download from their website.

Remember, there are rules restricting who can be a beneficiary. Super funds also have the flexibility to offer different types of nomination arrangements.

Who can be a beneficiary?

  • Your spouse
  • Your children (both under and over 18)
  • Financial dependents
  • Those with an interdependent relationship (such as elderly parents residing with you or sisters residing together)

The criteria of who is a beneficiary is only established at date of death which is why it’s important to make sure your nomination remains valid. Alternatively, you can also nominate your estate as a beneficiary.

What are the types of nominations?

  • Non-binding – this is a preferential nomination where you inform the super fund trustee who you prefer to receive your super. The final decision however is up to the trustee, and it is often these cases that result in complaints to the SCT (along with cases where no nomination was made).
  • Binding – you direct the super fund trustee how to pay the benefits. As long as the nomination is valid, the trustee has to pay as directed and does not have the ability to modify. This nomination lapses every three years, so it’s important to keep it up-to-date, otherwise you pass the discretion back to the trustee.
  • Non-lapsing – similar to binding, but doesn’t lapse and only needs updating if your circumstances change.

Consider your circumstances

Your circumstances may need you to consider an alternative superannuation fund, such as if your fund only offers non-binding arrangements and you have a complicated family situation and need the control over who will receive benefits if you die. Additionally, some super funds don’t allow you to nominate a beneficiary (such as government super funds), hence the importance of a Will.

For further assistance with your super beneficiary arrangements, contact your super fund or your financial adviser.

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