Does My Superannuation Go to My Estate When I Die?

Many Australians are surprised to learn that their superannuation is not automatically covered by their Will when they die. This is one of the most common, and most expensive, misunderstandings in estate planning, particularly for people with blended families.

Why Doesn’t My Will Control My Super?

Superannuation is held in trust by a super fund on your behalf during your lifetime. Because it is held in trust rather than actually owned by you in the traditional sense, it does not automatically form part of your legal estate when you die.

This means:

• Your Will has no direct control over your super.
• The super fund’s trustee has discretion over who receives the payout.
• Without specific instructions from you, the trustee will use their discretion, and may not distribute it to the people you would have chosen.

What is a Binding Death Benefit Nomination?

A Binding Death Benefit Nomination (BDBN) is a formal written instruction to your super fund telling them exactly who you want to receive your super on your death, and in what proportions.

When a valid BDBN is in place, the fund trustee must follow it, they have no discretion.

You can nominate:

• A dependant (a spouse or de facto partner, a child, or a person financially dependent on you)
• Your legal personal representative (which means the money flows into your estate and is then distributed by your Will)

The Critical Issue: BDBNs Can Expire

Many BDBNs expire after three years unless you have a non-lapsing nomination (which not all funds offer). If your nomination has lapsed at the time of your death, the trustee regains full discretion over who receives your super.

This is especially significant in blended families, your super could go to a former partner’s children, or be distributed in a way you would never have intended.

Action: Set a recurring calendar reminder every two and a half years to renew your BDBN with your super fund.

What About Life Insurance?

Similar rules apply to life insurance. Policies with a nominated beneficiary paid directly to that person, bypassing your estate and your Will entirely. Always check and update your life insurance nominations alongside your super.

Related Topics

• Legal Matters: Blended Families & Wills, Radio Episode
• What are the Risks of Sideways Inheritance?
• What Happens to Your Estate Without a Will?