You work hard to build your superannuation, but have you thought about what will happen to your money if you pass away before accessing it? While it can be uncomfortable to contemplate, it’s an essential part of financial planning that you can’t afford to ignore.

Unlike your home, car or bank accounts, your super doesn’t automatically become part of your estate. Instead, it follows a different path determined by either your explicit instructions or your fund’s trustees.

Choosing your beneficiary

In most cases, on your death your super fund will pay your super to your nominated beneficiary. Generally, you can nominate your dependants or legal personal representative (LPR).

A dependent can include:

• your spouse or de facto partner;
•  your child (including adopted children, stepchildren and your spouse’s children);
• someone financially dependent on you; or
• someone in an interdependent relationship with you – where you share a close personal bond, live together, and provide each other with support and care.

If you choose your LPR as your beneficiary, they’ll manage your super according to your will.
Seek tax advice regarding different beneficiaries. Adult children may not receive your super tax-free, whereas a spouse will.

Making your wishes known

To direct your super appropriately, make a specific nomination with your fund, either:

• binding death beneficiary nomination (BDBN): a valid BDBN must be in writing and witnessed by two adults who aren’t beneficiaries. BDBNs typically need to be renewed every three years. Once you give the BDBN to the fund, you can confirm, amend or revoke it by completing the formal notice requirements. You can nominate dependants or your LPR. If you nominate your LPR you need to maintain a legal will; or
• non-binding nomination: this serves as a guide to the trustee, who retains the final decision after assessing your circumstances.

You also need to ensure your nominee is valid to receive your super death benefit. For example, if you’re a single person with no kids, you can’t just nominate your parents, siblings or friends as they generally won’t be your dependants. Reach out to your super fund or your financial or estate planner to help you work out who you can nominate if you’re unsure.

Without a nomination, your fund’s trustee will decide who receives your super, potentially leading to unintended outcomes.

Life evolves, and so should your nominations

Major life events – marriage, divorce, having children, or the death of a nominated beneficiary – should trigger you to review your nominations. An outdated nomination might no longer reflect your current wishes.

Professional financial advice and estate planning can provide peace of mind that your hard-earned super will benefit those you care about most.