It’s not something most of us like to think about but knowing what happens to your super when you die is an important part of your financial plan.Your super isn’t automatically part of your will, and who receives it depends on the rules of your super fund and the nominations you make.
Understanding how it works can make a big difference to your loved ones when the time comes.
Here’s a simple guide to help you understand what happens to your super after death and how to make sure it’s handled according to your wishes.
Understanding What Happens to Your Super When You Die
When you die, your superannuation balance doesn’t automatically go to your estate. Instead, your super fund pays what’s called a super death benefit.
This benefit usually includes:
- Your super account balance, plus
- Any life insurance cover attached to your super.
Your super fund will decide who receives the money, based on your nomination and relevant laws.
Who Can Receive Your Super After You Die?
Your super can only be paid to certain people known as eligible beneficiaries. These include:
- Your spouse or de facto partner
- Your children (of any age)
- Someone financially dependent on you
- Someone you had an interdependent relationship with (for example, you shared finances and lived together)
- Your estate, if you’ve nominated your legal personal representative (LPR)
If you haven’t made a valid nomination, your fund’s trustee will decide who receives your super which might not always reflect what you intended.
The Importance of Nominating a Beneficiary
To ensure your super goes to the right person, you need to make a beneficiary nomination.
There are two main types:
1. Binding Nomination
A binding death benefit nomination tells your super fund exactly who should receive your super when you die.
If it’s valid, the fund must follow your instructions no one else can override it.
You’ll need to:
- Fill out a nomination form from your super fund
- Ensure it’s signed, dated, and witnessed correctly
- Renew it every three years, unless your fund allows a non-lapsing nomination
This is the most secure way to make sure your super goes where you want it to.
2. Non-Binding Nomination
A non-binding nomination expresses your wishes, but the fund’s trustee has the final say.
They’ll consider your nomination and personal circumstances before deciding who receives the benefit.
It’s better than having no nomination but less certain than a binding one.
What If I Don’t Nominate Anyone?
If you haven’t made a nomination, your super fund will determine who gets your benefit.
Typically, it will go to your spouse, children, or estate, but this process can take time and may lead to disputes or delays.
To avoid uncertainty or stress for your family, always check that your nomination is current and valid.
What If My Beneficiary Has Died or My Situation Changes?
If your nominated beneficiary passes away before you or your circumstances change (for example, divorce or separation), your nomination may become invalid.
That’s why it’s important to review your beneficiary nomination regularly ideally every few years or whenever your life changes significantly.
How Is My Super Paid Out When I Die?
Once your super fund is notified of your death, it will:
- Verify your death and identify your nominated beneficiary (or determine one if none is listed).
- Calculate your total death benefit, including insurance.
- Pay the money either as a lump sum or, in some cases, as a pension (income stream).
Spouses and dependent children can sometimes choose to receive the super as an ongoing income stream, while other beneficiaries (like adult children) will usually receive it as a lump sum.
Is Tax Payable on Super After Death?
Yes, in some cases. The amount of tax depends on who receives the benefit and whether they’re considered a dependent for tax purposes under Australian law.
- Tax dependents (like a spouse, de facto partner, or dependent child) receive the benefit tax-free.
- Non-dependents (like adult children who are financially independent) may have to pay tax on the taxable component of the benefit, generally between 15% and 17%.
If your super is paid to your estate, your legal representative handles the tax on behalf of the estate.
Key Steps to Take Now
To make sure your super is handled according to your wishes:
- Check your beneficiary nomination today and make sure it’s valid and up to date.
- Consider a binding nomination for certainty.
- Review your super insurance to understand how it contributes to your death benefit.
- Talk to a financial adviser to plan the most tax-efficient outcome for your loved ones.
Common Questions About What Happens to My Super When I Die
Does my will cover my super?
No, your will doesn’t automatically control your super unless you’ve nominated your legal personal representative as your beneficiary.
Can my super go directly to my children?
Yes, if you’ve nominated them as beneficiaries and they meet eligibility requirements. If not, it may be paid to your estate first.
How long does it take for my super to be paid out?
It usually takes a few months, depending on the fund and whether your nomination is valid.
Can I have more than one beneficiary?
Yes, you can divide your super between multiple beneficiaries by nominating percentages that total 100%.
What if I have multiple super accounts?
Each fund requires its own nomination, so make sure all your accounts are updated.
How Superannuation Works When You Retire –
Understand how your super becomes a reliable income stream in retirement.So, what happens to your super when you die?
Your super fund will pay your balance (and any life insurance) to your nominated beneficiaries or your estate. The best way to ensure it goes to the right people is by making and maintaining a valid binding nomination.
A little planning now can save your loved ones stress later and make sure your hard-earned savings go exactly where you want them to.
At Wealthlab, we help Australians manage their super strategically from retirement to estate planning so you can retire and rest easy knowing your finances are in order.
Book a consultation today to make sure your super and beneficiary plans are set up for peace of mind.
Learn More About Retirement & Superannuation
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