Most Australians who have ever worked will have a superannuation fund that their employer would have paid into regularly. If a superannuation fundholder has died, their beneficiary is entitled to claim the death benefit and any other funds invested, known as a superannuation Death Benefit.
This article explains how to claim a deceased person’s superannuation Death Benefit.
How to claim a superannuation Death Benefit
When a superannuation fund member has died, the total fund balance will be paid out to their beneficiary, along with any additional benefits from other products and services the deceased may have had in place with the super fund. This payment is known as a superannuation Death Benefit.
Some people may even have more than one superannuation fund. So if you are claiming superannuation after someone has died, you will need to contact every super fund the deceased person had money invested in.
To access the superannuation Death Befit, you will first need to find out:
- all of the superannuation accounts the deceased held;
- who was nominated as a beneficiary or beneficiaries in each fund; and
- if there are additional services included in the superannuation fund that may be claimed now that the super fundholder has died, for example, life insurance.
The difference between beneficiaries of a super fund v beneficiaries of an estate
The superannuation Death Benefit does not form part of the estate, as the fund is owned by a trustee (the company where the superannuation fund is held) rather than the fund member. That is why super funds cannot be gifted in the Will.
When a super fund member dies, trustees will distribute the member’s superannuation according to the terms of their deed.
Beneficiaries of the super fund will be nominated directly through the fund, rather than in a Will, if one exists. Therefore, the beneficiaries of the super fund can be often different to the beneficiaries of the estate.
Binding and non-binding beneficiaries
A Death Benefit is generally paid to one or more of the deceased person’s dependants (generally a spouse or children), or a legal representative like the executor or administrator of the estate.
The super fund member would have nominated a beneficiary when they opened the superannuation account. However, it is important to understand the difference between two types of beneficiaries when dealing with a deceased person’s superannuation fund: binding, and non-binding beneficiaries. Superannuation funds usually allow members to nominate non-binding or binding beneficiaries.
A binding beneficiary is someone nominated in writing to receive the superannuation benefit. They may be a dependant or a legal representative, such as an executor of the deceased estate.
If the deceased person nominated binding beneficiaries, they will need to apply for the superannuation Death Benefit. However, if you believe that the binding beneficiaries are not entitled to the Death Benefit, you should seek professional advice as soon as possible, to assist you in lodging a review with the superannuation fund.
On the other hand, if the deceased person had only nominated a non-binding beneficiary but no binding beneficiary, the super fund (trustee) will consider the fund member’s relationship with the nominated person nominated at the time of death. The trustee will decide if the Death Benefit will be released to the nominated non-binding beneficiary, or a dependant that determine to be more appropriate.
If a non-binding beneficiary was nominated, the trustee has full discretion to pay the superannuation Death Benefit one of three ways:
- to the nominated non-binding beneficiaries;
- to other dependants; or
- directly to the deceased estate.
What happens next?
The superannuation funds will review the deceased person’s accounts and any insurance covers held in their name. Then they will advise of what documentation is needed as proof of death (usually a death certificate and Will) to determine that you are an authorised person to claim the deceased person’s superannuation.
How to make a superannuation Death Benefit claim
To make a superannuation Death Benefit claim, the beneficiary needs to contact the relevant superannuation funds to notify them of the fund member’s death. The super fund will provide an explanation of the processes involved with initiating the superannuation Death Benefit payment request, and the documents required.
Each superannuation fund varies slightly, but the process generally follows the below key steps:
- Notify the superannuation fund of the death and provide a certified copy of the Death Certificate.
- Request the details of the nominated beneficiaries, fund balances and if any other amounts are payable.
- Fill out the necessary forms and apply for the Death Benefit payment.
- The superannuation assesses the application of the deceased’s relationship to the beneficiaries are reviewed.
- The fund advises of the outcome of the assessment and to whom the superannuation Death Benefit will be paid.
- If required, a request can be made to appeal the decision.
- If required, the superannuation’s final decision may be appealed tothe Superannuation Complaints Tribunal (SCT) within 28 days.
- The superannuation fund pays out the Death Benefit.
It’s important to understand who the nominated beneficiaries are early on, to determine if the superannuation payment forms part of the deceased estate. If the beneficiary is the executor, you will need to work through this process to calculate the total value of the death benefit and add the estimated Death Benefit in the Inventory of Assets and Liabilities.
Claiming ‘lost super’
It might be helpful to check if the deceased person had any ‘lost super’ (or unclaimed super). This can be done simply by filling out the ATO Searching for lost and unclaimed super form and mailing it together with certified copies of the death certificate and either the Will (if available); Grant of Probate; or Letter of Administration.
Tax on superannuation Death Benefits
The superannuation Death Benefit paid to dependants is tax-free. However, tax will be incurred on any superannuation tax benefits paid to the deceased’s children who were aged 18 years old or above and not financially dependant at the time of the death. You can find out more about tax on deceased estates in our article How to lodge a tax return for a deceased estate.
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This article is not legal advice. You should chat with an estate expert for specific advice on your personal or financial situation.