What happens to your superannuation when you die?

Superannuation is not like other assets as it is held in trust by the trustee of the superannuation fund. When you die, it does not automatically form part of your estate but instead, is paid to your eligible beneficiaries by the fund trustee according to the rules of fund, superannuation law, and the death nomination you made.

Death nominations

Most people have a death nomination in place to direct their superannuation to their nominated beneficiaries on their death. There are four types of death benefit nominations:

Binding death benefit nomination - Putting in place a binding death nomination will direct your superannuation to whoever you nominate. Generally, death benefit nominations lapse after 3 years unless it is a non-lapsing binding death nomination.

Non-lapsing binding death benefit nomination - Non-lapsing binding death nominations remain in place unless the member cancels or replaces them.

Non-binding death nomination - A non-binding death nomination is a guide for trustees as to who should receive your superannuation when you die but the trustee retains control over who the benefits are paid to.

Reversionary beneficiary – if you are taking an income stream from your superannuation at the time of your death (pension), the payments can revert to your nominated beneficiary.

Is your death benefit valid?

For a death nomination to be valid it must be in writing, signed and dated by you, and witnessed. The wording of your nomination also needs to be clear and legally binding.

Who can receive your superannuation?

Your superannuation can be paid to a SIS dependant, your legal representative, or someone who has an interdependency relationship with you.

Do beneficiaries pay tax on your superannuation?

Whether or not the beneficiaries of your superannuation pay tax depends on who the superannuation was paid to and how. If your superannuation is paid as a lump sum to a tax dependant, the superannuation is tax-free.

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