Most people between the age of 18 and 30 years have no idea what happens to their superannuation if they die. And who could blame them as the rules and procedures can appear to be very mysterious indeed. Many assume that upon their death superannuation and any insurance it provides is part of the estate for distribution to beneficiaries in accordance with their Will. That is not the case and unless they are tied together with a binding death nomination to the estate superannuation is treated separately.
How much am I worth?
The contribution from employers will increase over time, but usually the most significant portion will be the insurance death benefit if available. It could be anywhere between $30,000–$300,000 or more.
Where does it go?
Upon your death your superannuation will be paid out in the following manner:
- in accordance with your binding death benefit nomination, or
- if no nomination has been made:
- to your spouse (includes a married spouse or domestic partner – or both if you have a particularly complex life)
- your children
- to a person that you are in an interdependent relationship with
- or, if none of the above apply, then to your estate
If you have a binding death benefit nomination it will go to the person you nominate. Most people do not make binding nominations when they join their fund, because it is simply additional and confusing paperwork. But a lot of people put in a non-binding nomination, which will be merely persuasive for the Trustee if you die. And there is a good reason for this. If you nominated mum to be the beneficiary when you joined your fund at 18, it is unlikely that you would still want her to be the beneficiary when you are 30, married and have a child.
Why does this matter?
You have greater flexibility concerning wishes in a Will then you have with a binding death benefit nomination (and no flexibility at all for your super if there is no nomination in place). For example you cannot direct your superannuation fund to pay your benefit to a charity. But if you make a binding nomination in favour of your estate, your Will can make gifts to charities or to other persons who would not otherwise qualify to receive a superannuation benefit.
What should I do?
The solution is not rocket science; you just have to take action. Speak with one of our lawyers who will assist you to structure your affairs to meet whatever outcome you desire. They will answer any questions you have about how to direct your superannuation to where you want it to go.
For the next article on this topic read Who is your domestic partner - young adults and superannuation