That’s because the only people eligible to receive a superannuation death benefit, as paid out by the super trustee, are spouses (including de facto partners), children and step- or adopted children, a financial dependent or an interdependent. An interdependent is someone who lived with the person who died and who also had a close relationship with them. This person would also need to provide that one or both were providing financial and domestic or care support.
It means that, generally, if you’re a single person without children, you can’t simply nominate siblings, friends or even your parents by filling in the death benefit form on your superannuation fund’s website.
Sydney communications strategist Maya Ivanovic was shocked when she discovered this last year. She’d sought financial advice as she planned to buy a property, and the adviser suggested she also do some end-of-life planning.
“Had I not had that advice, I don’t think I would have understood these things with as much clarity and importance. I wanted to nominate my sister, and the adviser that I was speaking to said, ‘you can’t’.”
If she’d nominated her sister, the form would have been invalid.
Ivanovic instead nominated her de facto partner and dictated in her will that she wants her assets to be split between him and her sister.
While she approached it pragmatically, she admits it made for some uncomfortable moments as she discussed her plans with her family and partner.
“I had my will on my desk, and it said in big letters ‘The last will and testament of Maya Ivanovic’. My partner came over … and he actually picked up my notebook and put it on top of it because he didn’t want to see it or think about it.”
Hacker says stories like these are common, and can sometimes lead to expensive and painful family dramas. If the deceased person has nominated an invalid person to receive their super death benefit, the decision of where the superannuation goes will revert to the superannuation trustee.
“You just never know who comes out of the woodwork,” says Hacker.
I don’t have children or a partner, what do I do with my super?
If you don’t have a valid beneficiary, and you don’t want the trustee to decide who gets your super, there are still options, says Hacker.
The first step is to decide who is your legal personal representative. This is the person who executes your will or administers your estate.
If you list your legal personal representative as your binding death benefit nomination, your superannuation death benefit will then form part of the estate. To do this, you need to list “legal personal representative” on your superannuation fund’s death benefit nomination form.
You can then nominate how you wish to allocate the superannuation death benefit in your will. By doing this, you can direct superannuation to siblings, parents or even charities.
However, it’s worth noting that directing your super death benefit to people who are not dependents will generally trigger a tax bill of up to 30 per cent. Dependents generally receive it tax-free.
But, adds Hacker, it’s critical that people are careful when making a binding death benefit nomination. There are many variations, including technically binding, non-binding, lapsing and non-lapsing.
If it’s non-lapsing, once it’s signed, it remains valid until another nomination is signed. If it’s lapse, it will lapse after three years, and you’ll need to re-nominate someone.
And if it’s valid and legally binding, your super will be directed as you’ve outlined in your will. If it’s a non-binding death benefit nomination, however, it’s easier for it to be contested and for the trustee to make the final call on where it goes.
A growing problem
Poor understanding of what happens to superannuation is causing increasing issues, says Hacker, who is seeing more superannuation death benefit disputes than ever.
She estimates the number of people coming to lawyers for advice, or help in navigating disputes, has doubled in the last year.
The Australian Financial Complaints Authority (AFCA) registered 464 complaints about death benefits in 2021-22, with 54 per cent of these complaints related to how death benefits were distributed.
“Frequent issues include disputes about whether someone was a de facto spouse or was in an interdependency relationship with the deceased, or whether financially independent adult children from a previous relationship should receive a share of the death benefits ahead of a new spouse,” says superannuation lead ombudsman Heather Gray.
Not a priority
The biggest barrier to young people taking steps to organize super after death is simply that it is not a priority.
Many don’t know where to start or where to find information, and cite discomfort thinking and talking about death and dying.
Groundswell released the research to mark its annual Dying to Know Day, which falls on August 8, to encourage people to prioritize end-of-life planning.
One way to begin is to start small and focus on questions around organ donation, superannuation and a will, says Groundswell project campaign manager Cherelle Martin.
“As they move through life stages, they can come back and review their decisions and build from there,” she adds.
“It’s important for young people because it isn’t just about financial assets. End-of-life questions include financial decisions, sentimental reflections and decisions, organ and tissue donation, digital assets and passwords, and even environmental decisions.”
For Ivanovic, she’s just glad that she’s got it all organized.
“If something were to happen to me, I feel like my family would be so caught up in grieving and trying to make arrangements and… understanding what the next step is and just coming to terms with it,” says Ivanovic.
“This sort of clarity, I think, is really important to help guide them through what I imagine would be a really tough thing.”