In day to day practice we see a range of issues involving Wills, Estates and associated inheritance matters. 

One area that many people appear unclear on is their superannuation account and how it is treated on the death of the fund member. 

This is increasingly important. For many people, their superannuation is the next most valuable asset after their home. Even for young families it can be important, since many superannuation accounts include life insurance which can increase the amount payable from super on death significantly.

What happens to superannuation on the death of the fund member?

The first thing to note here is that superannuation is not usually dealt with via a will. It therefore needs separate consideration. The trustees of a superannuation fund are the legal owners of the account; the member is the ‘beneficial owner’ (that is, they enjoy the benefit of the asset).

One of the keys to directing your superannuation after death is understanding what system a particular fund has for a member notifying the trustees of their fund what they wish the trustee to do with their account balance in the event of their death. 

Occasionally, we have seen funds where the member has no say in what occurs to their account balance on their death. More often, trustees will offer some kind of ‘nomination’ process where the member can advise the trustee of their fund what they would want done with any money remaining in the fund on their death (called their ‘death benefit’). 

Some funds offer a nomination process in which the member merely expresses a ‘wish’ about what they would want done with their death benefit. This means that the fund trustee is obliged to consider the member’s wishes, but is not obliged to follow them. 

Other funds offer a higher level of certainty for the member through a process called a binding death benefit nomination. If the process is followed correctly and the person selected is a ‘dependant’ according to the relevant legislation, such a nomination will ‘bind’ the trustee of the fund.

Dealing with superannuation death benefits can be complex. Errors can produce unintended consequences which can have widespread and long lasting effects throughout a family. Dealing with superannuation death benefits should be approached with care and as part of a wider consideration of a person’s overall estate plan.