What Happens to Superannuation When Someone Dies in Queensland?

When someone passes away, many people assume their superannuation automatically forms part of their estate and is distributed under their Will. In many cases, that assumption is wrong.

Superannuation is often one of the largest assets a person leaves behind, but it is treated differently from ordinary estate assets such as bank accounts, vehicles, shares or real property. Understanding how superannuation is dealt with after death is important for executors, family members and anyone concerned about whether the right person will receive the benefit.

Is superannuation part of the estate?

Superannuation does not automatically form part of a person’s estate.

A person’s Will generally controls assets that are personally owned by them at the date of death. Superannuation, however, is usually held by the trustee of the superannuation fund. When a member dies, the trustee decides how the death benefit is paid, unless there is a valid binding death benefit nomination in place.

This means that even if a Will says who should receive the deceased person’s assets, the superannuation fund may still need to make a separate decision about who receives the superannuation death benefit.

What is a superannuation death benefit?

A superannuation death benefit may include:

• the deceased person’s superannuation account balance;
• any insurance held through the superannuation fund, such as life insurance;
• investment earnings up to the date of payment; and
• in some cases, other benefits payable under the fund rules.

For many families, the insurance component can be significant. This is why superannuation can become a major issue after death, particularly in blended families, second relationships, estrangements or situations where the Will and superannuation nomination do not align.

Who can receive superannuation after death?

Superannuation death benefits are generally paid to eligible dependants or to the deceased person’s legal personal representative, which usually means the executor or administrator of the estate.

Potential recipients may include:

• a spouse;
• a de facto partner;
• children;
• a person financially dependent on the deceased;
• a person in an interdependency relationship with the deceased; or
• the estate, through the legal personal representative.

The superannuation fund will consider the fund rules, superannuation law, any nomination made by the deceased, and the circumstances of the potential beneficiaries.

What is a binding death benefit nomination?

A binding death benefit nomination is a direction given by a superannuation fund member to the trustee of the fund about who should receive their superannuation death benefit when they die.

If the nomination is valid and binding, the trustee will generally be required to pay the death benefit in accordance with the nomination.

A binding nomination may direct the benefit to:

• one or more eligible dependants; or
• the legal personal representative, so that the superannuation is paid into the estate and dealt with under the Will.

However, binding nominations must usually meet strict requirements. Depending on the fund, they may need to be:

• in writing;
• signed and witnessed correctly;
• made in favour of eligible beneficiaries;
• current and not expired; and
• consistent with the rules of the particular superannuation fund.

Some binding nominations lapse after a set period, commonly three years, unless renewed. Others may be non-lapsing, depending on the fund rules.

What if there is no binding nomination?

If there is no valid binding death benefit nomination, the superannuation fund trustee usually has discretion to decide who receives the death benefit.

The trustee may ask potential beneficiaries and the estate to provide information, including details about:

• the deceased person’s relationship status;
• children and dependants;
• financial dependency;
• interdependency relationships;
• the terms of the Will;
• the identity of the executor;
• competing claims from family members; and
• any relevant personal or financial circumstances.

The trustee will then decide whether to pay the superannuation death benefit to one or more dependants, or to the estate.

This process can take time, particularly if there are competing claims.

Can a Will control superannuation?

A Will can only control superannuation if the death benefit is paid into the estate.

This may happen if:

• the deceased made a valid binding death benefit nomination directing the superannuation to their legal personal representative; or
• the superannuation trustee decides to pay the death benefit to the estate.

If the superannuation is paid directly to a spouse, child, dependant or other eligible recipient, it may not pass through the estate and may not be distributed according to the Will.

This is one reason why estate planning should consider the Will, superannuation nominations, life insurance and family circumstances together.

What if the deceased had a spouse and children from a previous relationship?

Superannuation disputes commonly arise in blended families.

For example, a deceased person may have:

• a current spouse or de facto partner;
• children from a previous relationship;
• a Will leaving assets to the children;
• a superannuation nomination in favour of the spouse;
• no nomination at all; or
• a nomination that has expired.

In these situations, family members may have different expectations about who should receive the superannuation. The current partner may say they were financially dependent on the deceased. Adult children may say the deceased intended for them to benefit. The executor may need to determine whether the superannuation is likely to be paid to the estate or directly to another person.

Early legal advice can be important, particularly where the superannuation balance or insurance component is substantial.

Can superannuation be contested?

Superannuation can sometimes be disputed, but the process is different from contesting a Will.

If a superannuation trustee makes a decision about payment of a death benefit, an interested person may be able to object to the decision within the relevant timeframe. The dispute may involve issues such as:

• whether the recipient was an eligible dependant;
• whether a nomination was valid;
• whether the trustee properly considered relevant information;
• whether the benefit should have been paid to the estate;
• whether a person was financially dependent on the deceased; or
• whether there was an interdependency relationship.

The available options will depend on the type of fund, the trustee’s decision, the fund rules and the timing of the objection.

It is important to act quickly if there is concern about a proposed superannuation death benefit payment.

What should an executor do about superannuation?

An executor should not assume that superannuation automatically belongs to the estate.

Practical steps may include:

• identifying all superannuation funds held by the deceased;
• checking whether there was insurance through superannuation;
• asking whether there was a binding death benefit nomination;
• reviewing whether the nomination is valid and current;
• notifying the fund of the death;
• obtaining claim forms from the fund;
• identifying possible dependants or competing claimants;
• considering whether the estate should make a claim for the benefit; and
• obtaining legal advice before making representations to the fund.

Executors should be particularly careful where the estate is insolvent, where there is a family provision claim, where there are blended family issues, or where the superannuation benefit may affect the overall estate distribution.

What if superannuation is paid to the estate?

If superannuation is paid to the estate, it is generally dealt with by the executor in accordance with the Will, subject to the usual rules applying to estate administration.

This may affect:

• the amount available for beneficiaries;
• the amount available to meet estate liabilities;
• the value of any family provision claim;
• taxation consequences;
• timing of distribution; and
• disputes between beneficiaries.

Executors should obtain advice before distributing estate funds, especially where there is a risk of a claim against the estate.

What if the superannuation is paid directly to a beneficiary?

If the superannuation fund pays the death benefit directly to a beneficiary, the payment may bypass the estate.

This can significantly change the financial outcome for the family.

For example, the Will might divide the estate equally between children, but the superannuation fund may pay a large death benefit directly to a spouse or dependant. Alternatively, a binding nomination may result in superannuation being paid to one person while other estate assets are distributed differently under the Will.

These outcomes can cause confusion and disputes if the deceased person’s estate planning documents were not reviewed together.

Why superannuation should be reviewed as part of estate planning

Superannuation nominations are often forgotten.

A person may update their Will but fail to update their superannuation nomination. This can create problems after major life events such as:

• marriage;
• separation;
• divorce;
• entering a new de facto relationship;
• having children;
• estrangement from family members;
• the death of a nominated beneficiary;
• retirement;
• moving into aged care; or
• receiving a significant insurance benefit through superannuation.

For many people, a proper estate plan should include:

• a Will;
• an enduring power of attorney;
• superannuation death benefit nominations;
• review of life insurance;
• consideration of tax consequences;
• consideration of family provision risks; and
• advice about blended family arrangements.

When should you get legal advice?

You should consider obtaining legal advice if:

• you are an executor and are unsure whether superannuation forms part of the estate;
• there is no binding death benefit nomination;
• a nomination appears to be invalid or expired;
• there is a current spouse and children from a previous relationship;
• a beneficiary has been left out of the Will;
• there is a dispute about who should receive the superannuation;
• the fund proposes to pay the benefit to someone you believe should not receive it;
• the estate may face a family provision claim; or
• the superannuation includes a large insurance component.

Superannuation can have a major impact on the final outcome of an estate. Executors and family members should obtain advice early, particularly before the estate is distributed or before any objection period expires.

Need advice about superannuation after death?

Our firm assists executors, beneficiaries and family members with estate administration, probate, superannuation death benefit issues and contested estate matters in Queensland.

If you are dealing with a deceased estate on the Sunshine Coast or elsewhere in Queensland, we can help you understand whether superannuation forms part of the estate, what steps need to be taken, and whether there are any risks of dispute.

Contact our office to book an estate administration or contested estate advice appointment.