Many Australians were left scratching their heads last week when it was reported that a Victorian Magistrate who, had a brief romance with a court clerk 45 years his junior, was awarded the clerk’s superannuation death benefits after her untimely death. The decision was despite the clerk having nominated her mother to receive the benefit.
The sad case underscores the little known fact that superannuation is dealt with under complex rules and is usually not dealt with by a person’s Will, or under intestacy laws (i.e. when a person dies without a Will).
So how is superannuation dealt with on a person’s death? In short – it depends. Generally:
- by law, death benefits can only be paid to a deceased person’s dependants (a spouse – married or de facto, children, or people who were financially dependent or in an interdependent relationship) or the deceased’s estate (Potential Beneficiaries);
- if the death benefits are paid to the estate, they are dealt with under their Will, or intestacy laws;
- each superannuation fund is governed by different rules. These rules sometimes set out the order of priority among the Potential Beneficiaries. The rules may also exclude certain Potential Beneficiaries;
- most funds will give members the option to complete a death benefit nomination which may guide how the payment is made;
- where there is no valid and binding death benefit nomination (BDBN), many retail funds give the trustee of the superannuation fund a very broad discretion on who to pay death benefits to; and
- most fund trustees will prioritise Potential Beneficiaries who are considered financial dependants (e.g. spouses and minor children) because less tax is payable.
When planning for the future, superannuation needs special attention (usually with professional advice) to ensure that it ultimately benefits those you intend.
For help with estate planning and superannuation, contact us.