Consideration of how your superannuation will be distributed after your passing is crucial, as it often represents the largest asset of many Australians. Distribution of superannuation may not follow the same process as the rest of your estate, requiring extra planning to ensure that your funds are allocated according to your wishes.
What happens to your superannuation when you die?
Without proper arrangements and estate planning, bequeathing superannuation can be a difficult task for intended recipients. It’s a common misconception that superannuation is automatically part of your estate and will be distributed according to your Will. The reality is that superannuation is not considered a part of your estate and will not be distributed as such. Therefore, it’s crucial to specifically address your superannuation when planning and nominating beneficiaries for your superannuation fund.
When it comes to naming beneficiaries, Australian law states that you cannot nominate your parents or siblings as beneficiaries for your superannuation, as they are not generally considered to be dependents (this excludes an interdependent relationship). Dependents are defined as your spouse (whether legal or de facto), children, financial dependents, or someone with whom you have an interdependent relationship.
How can you distribute your superannuation the way you want?
If you want to distribute your superannuation to non-dependents such as your parents or siblings, you can nominate your legal representative as a beneficiary. After your passing, the legal representative will be responsible
for distributing your superannuation as you intended. This means that your superannuation will be paid to someone whom you trust to distribute it according to your wishes, rather than relying on the trustee’s discretion.
How can you nominate a legal representative for your superannuation?
To nominate a legal representative for your superannuation, you will need to contact your superannuation fund and request a nomination of legal personal representative (LPR) form. Once you have the form, you will need to fill it out and provide it to your fund, along with any additional documentation that may be required.
The form will typically require you to provide your name and contact information, the name and contact information of your nominated legal representative, a statement indicating that you are appointing the nominated person as your legal representative for your superannuation fund, and your signature. It is important to choose someone you trust and who understands your wishes regarding your superannuation and your beneficiaries.
Keep your nominations up to date
It’s also crucial to keep your nominated beneficiaries up to date. Life circumstances can change and it’s important to update your nominated beneficiaries after significant life events, such as marriage, divorce, the birth of children, or the death of a relative. This will help to ensure that your superannuation is distributed according to your current wishes and can help to avoid additional stress for your loved ones in the event of your passing.
Do the beneficiaries need to pay taxes?
This really is determined by who receives your superannuation benefit and whether they are classified as a dependent, an interdependent or non-dependent. It is also important to keep in mind that the method of paying out your superannuation can also have tax implications.
In conclusion, it’s crucial to understand what happens to your superannuation when you die and to make the necessary arrangements to ensure that it is distributed according to your wishes. This may involve nominating a legal
representative or keeping your nominated beneficiaries up to date. By taking these steps, you can help to ensure that your hard-earned superannuation is used to support your loved ones in the way that you intended.
Forrest Private Wealth – Perth financial advisors
At Forrest Private Wealth, we make retirement and estate planning a whole lot easier. Nobody wants to think about the inevitable but bequeathing superannuation is important to ensure your loved ones are taken care of.
Working with Forrest’s team of Perth financial advisors means you no longer need to stress when you hear the question, “What happens to your superannuation when you die”.