If you die before all your super is withdrawn, your super fund typically pays a death benefit to your dependents, other nominated beneficiaries or your estate.
Death benefits include the balance of your super account plus an insurance benefit if you have been paying life insurance premiums from within your fund.
You need to nominate who you want to receive your death benefits when you die.
There are two main types of nomination:
- A non-binding nomination acts as a guide to your fund’s trustees but it can be overturned in some circumstances.
- A binding nomination allows you to name your dependent or legal representative, usually the executor of your will, and stipulate that they receive your death benefits. Your legal representative then distributes the money according to your will. You generally need to renew a binding nomination every three years to remain valid and most funds charge a small fee.
There are also two sub-categories of death benefit nomination: lapsing and non-lapsing. Historically most retail and industry super funds only permitted lapsing nominations, which would have to be renewed every 3 years. However in recent years, more super funds have agreed to allow non-lapsing nomination, that remain in-force permanently.
In addition – or in the alternative – to a lump sum death benefit, in some cases, your fund may allow your spouse or other eligible beneficiary to continue receiving your super pension after you die. This is called a reversionary pension because it ‘reverts’ to your chosen beneficiary.
Super death benefits are made up of taxable and tax-paid components. The amount of tax a beneficiary must pay depends on the component, whether they are a dependent for tax purposes and whether the super is taken as a lump sum or income stream.
I’ll provide further information in coming emails.
Maybe it’s time to put your affairs in order, and create a modern integrated estate plan before it’s too late?
Be cautious, and take advice before you decide.
When it comes to Wills, asset protection & estate planning in Australia, you can trust the oldest law firm in South Australia, Genders & Partners to guide you through the tough decisions you must make for your family’s future care and welfare.
If you have any questions, or would like further information, please call or email us.
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