Knowledge Bank
Does My Will Control My Superannuation?
Quick Answer
Your Will does not automatically control your superannuation.
Your super fund first considers its rules, any valid beneficiary nomination and the people who are legally able to receive the benefit.
The benefit may be paid directly to an eligible beneficiary or paid to your estate, where your Will can then determine how it is distributed.
The important question is whether your superannuation arrangements and your Will support the same intended outcome.
Introduction
Superannuation is often a substantial part of what a person leaves behind.
However, it does not automatically follow the instructions in their Will.
It is held within the superannuation system and may be paid under the fund rules and any valid beneficiary arrangements.
This means that your Will and your superannuation need to be considered together, even though they may operate through different pathways.
Why Is Superannuation Different?
Your superannuation is held within your super fund under separate rules.
It does not automatically become part of your estate when you pass.
The fund must first determine where the benefit should be paid.
That outcome may be affected by:
- the fund rules;
- any valid Binding Death Benefit Nomination;
- any non-binding nomination; and
- the people who are legally able to receive the benefit.
Your Will only controls the superannuation if the benefit is paid to your estate.
Where Can The Benefit Be Paid?
Directly To An Eligible Beneficiary
The benefit may be paid directly to a person who is eligible under the superannuation rules.
This may include:
- a spouse or partner;
- a child;
- someone who was financially dependent on you; or
- someone in an interdependent relationship with you.
When the benefit is paid directly, it does not pass through your estate and is not distributed under your Will.
To Your Estate
The benefit may instead be paid to your estate.
It can then be dealt with under your Will, including through any relevant Testamentary Trust arrangements.
Whether direct payment or payment to the estate is more appropriate depends on the people involved, the wider estate plan and what you want the benefit to achieve.
Who Decides?
When you pass, the fund checks whether you have made a valid Binding Death Benefit Nomination.
If you have, and the nomination names someone or your estate who can legally receive the benefit, the fund will generally be required to follow it.
If there is no valid binding nomination, the fund Trustee usually decides where the benefit should be paid.
The Trustee may consider:
- the fund rules;
- the people who may be eligible;
- any non-binding nomination; and
- the family circumstances.
This is why the absence of a valid binding nomination can leave the final outcome outside the control of your Will.
What Is A Binding Death Benefit Nomination?
A Binding Death Benefit Nomination is a formal direction to your super fund about where your benefit should be paid after you pass.
It may direct payment:
- to one or more eligible beneficiaries; or
- to your estate.
If the nomination is valid, the fund will generally be required to follow it.
The detailed requirements, expiry rules and available choices are explained in the next Knowledge Bank article.
Why Do The Arrangements Need To Be Reviewed?
Your Will may be updated while an older superannuation nomination remains unchanged.
Over time:
- relationships change;
- children are born;
- beneficiaries pass;
- family responsibilities change; and
- the wider estate plan develops.
You should also check whether your nomination expires.
Many binding nominations expire after three years, although some funds offer nominations that remain in place until they are changed or revoked.
The rules vary between funds.
Practical Point
A nomination can only support your estate plan if it is valid, current and points the benefit in the intended direction.
When you review your Will, review your superannuation nominations at the same time.
One Plan, Different Pathways
Consider someone whose Will leaves their estate equally to their three adult children.
Their superannuation nomination directs the super benefit to their spouse.
That may be exactly what they intended.
They may want their spouse to receive the superannuation directly while the estate passes to the children.
It may also be an old nomination that no longer reflects the family circumstances or the intentions recorded in the Will.
The important issue is not whether the Will and the nomination produce identical distributions.
It is whether the difference is deliberate and both arrangements support the same overall intentions.
What About A Self-Managed Super Fund?
A Self-Managed Super Fund may require additional planning.
The people who control the fund after a member passes, the terms of the trust deed and any valid nomination can all affect how the benefit is dealt with.
These issues require separate review, particularly where control of the fund or pension arrangements may change after a member passes.
Common Mistake
“My Will says who receives everything, so my superannuation is covered.”
A Will only controls a superannuation benefit if the benefit is paid to the estate.
Where the fund pays it directly to another person, the Will does not control that payment.
Frequently Asked Questions
Can My Superannuation Be Paid To My Estate?
Yes.
If the benefit is paid to your estate, it can then be distributed under your Will.
This may also allow relevant Testamentary Trust arrangements in the Will to apply.
Who Can Receive My Superannuation Directly?
The available recipients are generally limited to people recognised under the superannuation rules.
These may include a spouse or partner, a child, someone financially dependent on you, someone in an interdependent relationship with you, or your estate.
The circumstances and fund rules should be checked before making a nomination.
What Happens If I Do Not Have A Valid Binding Nomination?
The fund Trustee will usually decide where the benefit should be paid.
The Trustee may consider the fund rules, the people who are eligible, any non-binding nomination and the family circumstances.
The decision may not produce the same outcome as your Will.
Do Binding Nominations Expire?
Many do, commonly after three years.
Some funds offer nominations that do not lapse and remain in place until they are changed or revoked.
The rules depend on the fund, so the nomination should be checked rather than assumed to remain valid.
Final Thoughts
Your Will and your superannuation perform different roles.
Your Will records how the assets in your estate should be distributed.
Your superannuation may be paid under a separate nomination or a decision made by the fund.
Those arrangements do not need to follow the same pathway, but they should reflect the same considered intentions.
A complete estate plan checks both and makes sure they continue to work together as circumstances change.