For a parent, the most difficult and frightening thing to consider is, what will happen to your children in the event of your untimely death. But, for parents in New South Wales, there are a number of avenues to financially protect your children in the event that something tragic happens to you.
If the parent of the child has elected to be a member of a Superannuation plan, then the child and other dependents can make an application to receive Superannuation death benefit payments. This benefit is payable under the Superannuation Industry (Supervision) Act 1993 (SIS Act). Read on to learn more about superannuation beneficiary payments and how a wills and estate lawyer can help you.
- Distribution of funds
- Beneficiary trust for minors
- Tax implications for beneficiaries
- Non-dependant family members
What are superannuation death benefit payments?
A superannuation death benefit payment is made by a super provider to a beneficiary or trustee of a deceased estate, when the member of that super has died.
Distribution of funds
There are two possible ways that monies might be available to dependents of the deceased:
- From the balance of a superannuation account that is being held by the employer
- An insurance amount purchased by the deceased
If there are monies available, the funds can be distributed to any of the following dependent persons:
- A spouse
- A minor child (under the age of 18 years)
- A child who was still a dependent up to the age of 25
- A child with a disability
- A person who was interdependent upon the deceased, even if they were not family. This can include persons who reside together or have a financial dependence upon one another
- A person who the deceased has specifically nominated to receive the benefits
When a superannuation death benefit payment is due, the law requires that it be distributed as soon as practicable. To prevent unnecessary hardship to the dependent, common sense must rule and the employer, or holder of the fund must make the distribution in a reasonable and timely manner.
Beneficiary trust for minors
In the event that the monies are being paid out to a child that is a minor, the parent can elect to set up a trust for the child with a trustee. Under these circumstances, the benefit can be paid into the trust for the benefit of the child. The superannuation proceeds trust will contain the terms defining what circumstances allow for monies to be withdrawn, for the care and maintenance of the minor.
Tax implications for beneficiaries
The benefit can be paid in three forms, which are all determined by the terms of the fund:
- A lump sum payment
- A stream income
- A combination of both
However it’s important to keep in mind that the benefit can incur tax rates in some situations. The beneficiaries’ status determines if the monies will be taxable or not. This includes if the beneficiary is a:
- Spouse or de facto spouse
- Former spouse or de facto spouse
- Child under the age of 18
- Any person who was financially dependent upon the deceased
- A person who qualifies as having been interdependent upon the deceased
However, adult children, or nominated recipients, who are financially independent, will be required to pay a taxable component on the benefit.
Non-dependant family members
In addition, it is possible for a person to elect to leave their superannuation to a non-dependent or non-family member. It is important to remember that if you have been nominated to receive a death benefit, in some cases circumstances can override the election. A binding election is only enforceable for up to three years after the signing of the nomination. Persons choosing this option need to also update their will indicating that the superannuation funds are to be paid in accordance with their election. It is important that if the benefactor wants to continue the binding nomination, that it be renewed as required.
Furthermore, there are a few life changing circumstances that can automatically change a nominated beneficiary. These changes include:
- Death of the nominated beneficiary.
In each of these cases it is important for the benefactor to take the necessary steps to ensure that the intended beneficiary is either changed or reinforced to match their intentions.
Start planning your superannuation with Owen Hodge Lawyers
In the event that you find yourself in need of assistance regarding any superannuation issues, please speak with our lawyers for death benefits at Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to contact us at your earliest convenience or call 1800 770 780to to schedule a consultation today.
Superannuation death benefit payment FAQs
What is a superannuation beneficiary?
A superannuation beneficiary is either a family member or close friend that you nominate to receive your super when you pass away.
How much is the superannuation death benefit?
This will differ depending on the superannuation company you choose. If you’re unsure, we recommend contacting your super company to learn more about your death benefit.
How long does a superannuation death claim take?
Generally, once the decision has been settled, each person on the claim will be notified within 28 days. After any objections have been made, the superannuation death benefit payments can be made. If you’re unsure about your super claim, please speak to a wills and estate lawyer at Owen Hodge today.