Large sums are often payable from a super fund when someone dies, particularly with recent super reforms and with many funds containing life insurance policies.
However, death benefits are not automatically distributed according to a Will, nor even necessarily in accordance with any nomination a person has made to the trustee of a fund.
A death benefit from a super fund must either be paid out as a lump sum or as a pension – it cannot merely be left in the fund. But a lump sum death benefit from a super fund does not by law form part of a deceased’s estate. When someone has validly nominated a preferred beneficiary before their death, the trustee will consider the nomination, but is not bound by it, unless it was a binding nomination.
Often on joining a fund, members are given a form to nominate preferred beneficiaries. If the fund’s trust deed allows binding nominations, these generally need to be updated every three years to stay valid. It is also important to update non-binding nominations regularly.
While binding nominations provide certainty, they can produce results the Deceased may not have desired – for example, if they had not been kept up to date and the Deceased has departed, married or had a child. For this reason, they have not been as popular as anticipated.
Trustees usually distribute the benefit directly to the dependents rather than the estate. This avoids any loss of funds if an estate is insolvent or subject to litigation. Payment directly from a super fund will not generally be available to creditors of an estate.
Should you require advice on beneficiary nominations or other matters relating to your Will, RM Legal and Solicitors Parramattaare more than happy to assist you in ensuring your needs are met. RM Legal has extensive experience in all aspect of estate planning.
