Superannuation Claims

When a person dies their superannuation benefits need to be paid out to someone who is entitled to claim them.

Many people believe that their superannuation will be paid according to their Will when they die. This is not the case – super will not be part of your estate when you die unless your superannuation trustee decides to pay your super to your estate. This applies even if you have a self-managed superannuation fund (SMSF) and manage your superannuation directly.

The trustee of your super fund holds your super according to the terms of the fund’s trust deed. This deed, and the superannuation law, says how the trustee of the fund can deal with a deceased member’s death benefit.

Binding Death Benefit Nominations (BDBNs)

Most superannuation trust deeds will allow the members to make a Binding Death Benefit Nomination (BDBN). A BDBN operates like a Will for your superannuation by binding your trustee to pay your superannuation according to your wishes after your death. Unlike a Will, a BDBN can expire – normally every three years.

There are strict legal requirements for a valid BDBN. If there is a SMSF, then there may be more, or different requirements. Most SMSFs will also allow members to prepare a ‘non-lapsing’ BDBN which does not expire after three years and will continue to be valid unless it is revoked or replaced.

Who can make a super claim?

The only people who can bring a claim on a deceased person’s super are:

Dependants: This includes your spouse, children, and any person financially dependent on you at the time of your death.
Legal Personal Representative: This is the executor of your Will or the administrator of your estate.

What is the process of making a super claim?

Notification: The trustees are notified of the member’s death by the person’s family or their executor.
Verification: The trustees will verify the death and the validity of the BDBN.
Consideration – The person’s dependents send their claims to the trustee. The trustee considers the claims that it has received and may ask for more information. If there is a BDBN, then the trustee does not need to consider claims because the trustee must distribute according to the BDBN.
Distribution: The death benefits are paid according to the BDBN or, if there is no valid BDBN, according to the trustees’ discretion, the trust deed, and the superannuation laws.

What about tax?

Tax advice from a qualified advisor should always be obtained if you receive a superannuation death benefit. Depending on the structure of the deceased member’s account and depending on the beneficiary’s circumstances, tax may be payable on the death benefit.

What if you disagree with the trustee’s decision?

If you are not satisfied with the distribution of a superannuation death benefit, you can:

Raise the issue with the trustees and ask them to review the decision; or
If the issue is not resolved, you can take the matter to the Australian Financial Complaints Authority (AFCA), the Superannuation Complaints Tribunal, or to a court.

If you intend to challenge a superannuation death benefit decision, you should seek urgent legal advice. If you do not bring your claim within strict time periods, you may lose your opportunity to have your objection heard.

What can Elringtons do to help?

Our estates team can help you to prepare a valid binding death benefit nomination so that you can rest assured that your super will pass according to your directions. (link to estate planning landing page).

We can also advise you about your rights to make a death benefit claim, help you make your claim, or help you challenge a trustee’s decision.