Is your Super really yours after your death? Why beneficiary nominations need attention now

Jenna Ingram
6 hours ago
5 min read

The Stats

Many Australians may not have an effective binding death benefit nomination in place for their superannuation. Research by Super Consumers Australia estimates that approximately 15.7 million Australians with superannuation may not have a binding death benefit nomination.

This is important because, without a binding death benefit nomination, the trustee of the superannuation fund has discretion as to payment of your superannuation after your death.

For accountants and other trusted professional advisers, this is a timely reminder to encourage clients to review not only their Wills, but also how their superannuation death benefits are intended to be dealt with.

Your Will does not necessarily control your super

One of the most common misconceptions in estate planning is that a person's Will determines who receives all of their assets when they die.

Superannuation is different. In most cases, a member's superannuation is held on trust by the trustee of their superannuation fund, and does not automatically form part of their deceased estate.

This means that simply naming someone as a beneficiary of superannuation under a Will does not necessarily mean that that person will receive the deceased's superannuation.

Depending on the rules of the fund and the arrangements put in place by the member, the death benefit may be paid directly to an eligible beneficiary, paid to the member's legal personal representative and then dealt with through the estate, or determined by the fund trustee.

This distinction can be significant, particularly where superannuation and associated life insurance represent a substantial part of a client's overall wealth.

Binding and non-binding beneficiary nominations are not the same

A non-binding beneficiary nomination records the member's wishes, but does not necessarily require the trustee to follow them. The trustee may still need to identify eligible beneficiaries and determine how the death benefit should be distributed.

By contrast, a valid binding death benefit nomination generally requires the trustee to pay the death benefit in accordance with the nomination, provided the nomination remains valid and the nominated recipient is eligible to receive the benefit.

Depending on the fund, a binding nomination may be lapsing or non-lapsing. A lapsing nomination commonly needs to be renewed every three years. Fund rules can differ, so clients should confirm what type of nomination their fund permits, whether an existing nomination remains current and what formalities are required.

A nomination can also fail if it has not been completed correctly, has expired, or nominates a person who is not eligible to receive the benefit under superannuation law and the fund rules.

Who can receive a superannuation death benefit?

Superannuation law restricts the persons to whom a superannuation death benefit can generally be paid. Eligible recipients may include:

a spouse or partner;
children;
a person who was financially dependent on the member;
a person in an interdependency relationship with the member; or
the member's legal personal representative, being their estate.

The ability to nominate a legal personal representative is particularly important from an estate planning perspective. If the death benefit is paid to the estate, the member's Will can then govern how that benefit is distributed, subject to the administration of the estate and any applicable claims.

However, directing superannuation through an estate is not automatically the best approach for every client. Taxation, family circumstances, asset protection considerations, potential estate claims and the identity of intended beneficiaries can all affect the preferred strategy. Importantly, superannuation law and taxation law also use different concepts of dependency when determining who can receive a death benefit and how that benefit is taxed.

Legal, tax and financial advice should therefore be coordinated. The practical message for clients is straightforward: a beneficiary nomination should not be treated as an administrative afterthought.

When should clients review their arrangements?

A review is particularly important where a client:

has no beneficiary nomination recorded with their super fund;
is unsure whether their nomination is binding or non-binding;
has a nomination that may have expired;
has recently married, separated or divorced;
has commenced or ended a de facto relationship;
has children from a previous relationship or a blended family;
wishes to benefit someone who may not qualify as a superannuation dependent;
has substantial life insurance held through super;
has recently updated their will but not their superannuation arrangements;
has changed superannuation funds;
has commenced a pension or income stream; or
is a member of a self-managed superannuation fund.

For SMSF members, the position can involve additional considerations. The trust deed, trustee structure, succession arrangements, any binding death benefit nomination and pension documentation should be reviewed together rather than in isolation. The ATO similarly emphasises the importance of the SMSF trust deed and the fund's governing rules when dealing with death benefits.

Why accountants are well placed to identify the issue

Accountants are often among the first advisers to become aware of events that should trigger an estate planning review.

A change in business ownership, retirement, the sale of an asset, a relationship change, the establishment of an SMSF, a significant increase in wealth or a change in family circumstances can all indicate that a client's existing estate planning arrangements may no longer achieve their intended outcome.

This does not require accountants to give legal advice about beneficiary nominations. Instead, it creates an opportunity to ask a simple question:

When did you last review your will and your superannuation death benefit nominations together?

That question can identify a gap before it becomes a dispute.

A useful estate planning review should consider the client's Will, enduring powers of attorney and appointments of enduring guardian where relevant, superannuation death benefit nominations, SMSF arrangements, business succession documents, jointly held assets, trusts, and life insurance.

The aim is not simply to have documents in place. It is to ensure that the documents and structures work together.

Practical next steps for clients

Clients should consider obtaining a current copy or confirmation of their beneficiary nomination from each superannuation fund and checking:

whether a nomination exists;
whether it is binding or non-binding;
whether it is lapsing or non-lapsing;
when it expires, if applicable;
whether the nominated beneficiaries remain eligible;
whether the nomination remains consistent with the client's current wishes and will; and
whether changes in family, financial or business circumstances require a broader estate planning review.

Where there is uncertainty, particularly in blended families, estranged relationships, SMSFs, substantial superannuation balances or complex estate plans, obtaining legal advice early can reduce the risk of delay, disputes and unintended outcomes after death.

How Jenkins Legal & Advisory can assist

Jenkins Legal & Advisory can assist clients to review their estate planning arrangements and consider how their superannuation death benefit nominations interact with their wills and broader succession plan.

We can also work collaboratively with a client's accountant and financial adviser so that the legal, taxation and financial aspects of the strategy are properly coordinated.

If you have a client who may benefit from reviewing their arrangements, or if you would like further information, please contact Jenkins Legal & Advisory.

Disclaimer

This article is provided for general information purposes only and does not constitute legal advice. It does not take into account the particular circumstances, objectives or needs of any individual. Superannuation, taxation and estate planning outcomes can vary depending on the governing rules of a superannuation fund, the member's circumstances and the law applying at the relevant time.

Readers should not act or refrain from acting solely on the basis of this article. For further information or legal advice about superannuation death benefit nominations, estate planning or related matters, please contact Jenkins Legal & Advisory. Appropriate taxation and financial advice should also be obtained where relevant.

This article is not legal advice, and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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Insight