Many are surprised that superannuation does not automatically come into an estate. This is because only assets you own, such as a house, car, investments, or savings, become your estate. Superannuation on the other hand is held in a trust by the trustee of your super fund and is governed by Commonwealth superannuation law, which is why different rules apply.
Ideally you would have made a nomination to your superannuation fund as to whom you wish for your superannuation and death benefits to be paid to, and in what percentage if more than one person is nominated. You can nominate any dependants as defined under the superannuation law.
You can nominate for the funds to go into your estate and be distributed by your Will. Nominating your estate can be a tax effective method of distributing your assets. Different tax treatments of superannuation can apply depending on whether your super is paid as a lump sum, income stream or mixture of both, and if your beneficiary or beneficiaries are classified as ‘tax dependants’.
In some cases, a trustee can decide to put the funds into the estate. It can be possible for a person to not want to receive the superannuation pay out as receiving such a large amount may affect other entitlements they receive that are means tested. If you don’t make a binding nomination the trustee of the super can distribute your benefits amongst your dependants and your estate in whatever way it believes is fair and reasonable.
Children over the age of 25 (other than those with a permanent disability) cannot receive your super death benefits as an income stream. And, if they do receive a death benefit pension from an earlier age, they’ll typically need to cash it as a lump sum by the time they turn 25. In addition changes to the superannuation rules, came into effect on 1 July 2017 which may further restrict the ability to pay a death benefit pension to your beneficiaries as a result of the introduction of a new pension transfer cap.
Wills & Estate Law | Kenny Spring Solicitors
Please note the answers provided are for your general information only and we ask you to call our office on 02 6331 2911 to obtain detailed legal advice for your individual situation.