What Happens to My Super When I Die?

What Happens to My Super When I Die?

Lawyers often hear a client say something like ‘I don’t have any assets, so I don’t need a will’. This couldn’t be further from the truth. These days, superannuation is often a person’s largest or second largest asset.

In the estate planning world, super is an unusual type of asset. This is because it is not an asset of your estate which is covered by the provisions of your will.  Your will only covers assets owned by you personally.  On the other hand, your super is held for you on trust for you by your super fund trustee.

In order to direct who gets your super in the event of your death, you need to complete a binding death benefit nomination (BDBN) with your superannuation fund (and keep it up-to-date as many expire every three years). I bet you’re still thinking, well in that case I don’t need a will. However, what lawyers often find in practice is that many people do not understand who you can and can’t actually nominate on those BDBN forms for your nomination to be binding. Under superannuation law, the eligible beneficiaries include your dependants (ie spouse, de facto or children (including any step-children or adopted children) or anyone who is financially dependent on you or has an ‘interdependency relationship’ with you when you die) or your legal personal representative (ie the executor of your will or administrator of your estate).

When asked ‘Do you have a BDBN in place?’ well over half of younger people or people without dependants respond along the lines of ‘Yes, I have nominated my sister and my brother’ or ‘No, what is that?’. If your nomination is invalid (ie if you have nominated someone who does not fit within the criteria of eligible beneficiaries above) or you do not having a BDBN in place, the trustee of your super fund has discretion as to who they pay your death benefit to. If you don’t have any dependants, then in a majority of cases the super fund will pay your death benefit to your estate, to be distributed in accordance with the terms of your will.

If your super is paid into your estate and you don’t have a will, it will be distributed in accordance with the rules of intestacy, which are a set of legislative rules. The rules of intestacy do not take into account your circumstances at the time of your passing and therefore, the distribution of your estate under these rules, may not be in accordance with your wishes. Let’s use the example of Rebecca’s estate.

Rebecca was 28 years of age when she passed away suddenly. She did not have a spouse (married or de facto) and had no children. Her main asset was her super (including a life insurance component), worth approximately $200,000. Rebecca had completed a BDDN in favour or her two siblings John and Sarah (50% each). She did not have a will. Rebecca was close with her mother, Sue, however she was estranged from her father, Barry. Sue attempted to administer Rebecca’s estate as her next of kin. She contacted the super fund to have the funds paid to John and Sarah, however the super fund asked for a grant of letters of administration from the WA Supreme Court before they could release the funds. Sue eventually obtained the grant and the super fund advised her that because Rebecca’s nomination was invalid, they would be making a distribution to her estate. Because Rebecca died intestate (that is without a will), the rules of intestacy applied. Under the rules of intestacy, as Rebecca was not survived by any dependants, her estate was distributed to her parents equally. This was clearly not in accordance with her wishes and there was very little her siblings (and her mother) could do. If Rebecca had simply prepared a will gifting her estate to her siblings equally, then this situation could have been avoided entirely.

Finally, if you have read this far and think that you need some practical advice or assistance in relation to your situation, then now is probably the time to get in touch. Austral Legal can help and we offer an initial discounted 30-minute SmartMove appointment for $80 by phone or in person at our office. Bookings can be made online through our website or simply by phoning our office on 08 9745 9550. Once we have a handle on what is required, we may well be able to offer a fixed fee for any further legal services, giving you cost certainty from the start. Austral Legal. Practical advice.