Who inherits your super?
There are only certain people who can inherit your super when you die. There are also two different types of nominations you can make. Here’s what you need to know before making your super beneficiary nomination.
Super is different from other assets, such as your house, because the trustee of your super fund ultimately decides who gets your super and any associated life insurance, if it’s held within the super fund, when you die. Super doesn’t automatically go to your estate, so it’s not automatically included in your Will. That’s why you need to tell your super fund who you nominate. And, depending on the type of nomination, they’ll either consider your nomination or be bound to pay it as you’ve nominated.
Who can you nominate?
Super fund trustees can only pay your super to ‘eligible dependants’ or to the ‘legal personal representative’ (LPR) of your estate.
Eligible dependants* are restricted to these people:
A spouse includes a legally married spouse or a de facto spouse, both same-sex and opposite-sex.
A spouse can be a person you’re legally married to but are now estranged or separated from. So, if you haven’t formally ended a marriage, your husband or wife is still considered your dependant under super law. And, while you can’t be legally married to two people, it’s still possible to have two spouses – a legally married spouse and a de facto spouse.
A child includes an adopted child or a stepchild.
Even though a stepchild is included in the definition of a child, if you end the relationship with the natural parent or the natural parent dies, the child is no longer considered your stepchild. However, they may still be considered a financial dependant or in an interdependency relationship with you and could therefore continue to be a beneficiary of your super.
Generally, a person who is fully or partially financially dependent on you can be nominated as your super beneficiary. This is as long as the level of support you provide them is ‘necessary and relied upon’, so that if they didn’t receive it, they would be severely disadvantaged rather than merely being unable to afford a higher standard of living.
Two people have an interdependency relationship if they live together and have a close personal relationship. One, or each of them, must also provide a level of financial support to the other and at least one or each of them needs to provide domestic and personal care to the other.
Two people may still have an interdependency relationship if they do not live together but have a close personal relationship. For example, if they’re separated due to disability or illness or due to a temporary absence, such as overseas employment.
A person is not a dependant if they are your parents, siblings or other friends and relatives who don’t live with you and who are not financially dependent on you or in an interdependency relationship with you.
If you do not have a dependant you should elect for your super to be paid to your legal personal representative and prepare a Will which outlines your wishes.
Legal personal representative
A legal personal representative (LPR) is the person responsible for ensuring that various tasks are carried out on your behalf when you die. You can nominate an LPR by naming the person as the executor of your Will. Your Will should outline the proportions and the people you wish your estate, including your super, to go to.
Types of nominations
There are two types of nominations you can make once you decide which super dependants, or LPR, you wish to nominate:
1. Non-binding death benefit nomination
A non-binding death nomination is an expression of your wishes and the trustee will consider who you’ve nominated but they’ll ultimately make the final decision about who receives your super and any associated life insurance. A non-binding nomination can be made online by logging into your account. You don’t need to have your nomination witnessed or provide a signed copy of your nomination.
2. Binding death benefit nomination
A binding nomination means the trustee is bound by your nomination. They must pay your super benefits to your nominated dependants in the proportions you set out or pay it to your estate if you nominated an LPR.
Binding nominations need to be signed and witnessed by two witnesses who are not named as beneficiaries. Also, they expire after three years unless you re-affirm your nomination. However, at IOOF Employer Super, after three years elapses we will continue to treat your nomination like a non-binding nomination, which means your wishes are still considered.
If you’re not sure of the best way to nominate your super beneficiaries, or the tax implications, please contact your financial adviser. If you don’t have an adviser, we can put you in touch with one.