Superannuation is held in trust for its members until a condition of release is met. Death is a condition of release so the trustee can pay the super death benefits of the deceased out.
However, under the SIS Act the death benefits can only be paid to certain people who are classed as “SIS Act dependants” or to the estate:
A SIS Act Dependant includes
– A spouse (married or de facto)
– Any child
– Any person with whom the deceased had an interdependency relationship
Or to the estate:
– The deceased’s legal personal representative (executor or administrator of estate)
Who the benefits are paid to amount the above is determined solely by the trustee of the fund, subject to the trust deed or a valid binding death benefit nomination (BDBN).
Under trust law a trustee cannot be directed by others – a trustee’s discretion cannot be vetted. To get around this trust deeds can direct that the trustee must follow a written direction such as a BDBN.
Some funds only allow a 3 year BDBN which then lapses. If you don’t or cannot renew then the BDBN expires and won’t be effective.
Without a valid BDBN the trustee will decide where your super goes. If you have your super in an industry fund strangers will decide. If you have 2 children and one is a member of your SMSF then this child will decide where your super goes – to themselves only possibly.
People’s super balances are increasing and together with life insurance proceeds it wouldn’t be unusual for an average person’s super balance to be over $1mil on death.
Tip – make sure you understand where your super will go when you die and do something about it if there is a chance it could end up somewhere you don’t want it to go.
Originally posted at