Who Can You Leave Your Super To?
Your super savings are the fruits of your labor and can be the key to a more comfortable retirement in the future. But in case you pass away, you won’t be able to fully enjoy your hard-earned money. The good thing is that you can nominate a person as your beneficiary to receive the superannuation death benefit.
Why Nominate A Beneficiary?
Super savings aren’t considered part of your estate. Savings and earnings in a super account are held under a trust until you satisfy the requirements for access. By stating the beneficiary of the account in case of your death, you save your loved ones from the trouble of managing the legal means to access your super.
In case you don’t nominate a beneficiary, relevant laws will decide where your savings will go. Usually, it will be your dependent or legal personal representative that will benefit from the super you’ve left. This can be the root of confusion and dispute among your loved ones, and that’s one of the last things you want to happen when you pass away.
By nominating a beneficiary, you can clarify who will receive your super in case of unexpected circumstances.
Who Can You Nominate?
The following can be assigned as the beneficiary of your super account:
- Spouse or partner
- Financial dependents
- Estate or legal representative
Tax may be imposed on the super that your beneficiary will receive unless they’ve been declared as your financial dependent.
Financial dependents can be qualified as dependents for tax purposes and can receive benefits tax-free. Otherwise, beneficiaries will have to pay taxes on the taxable component of the super.
Financially independent beneficiaries will get the tax-free component of the super without having to worry about taxes. Tax-free components of the super include after-tax contributions, investment earnings on that non-taxable portion, and government co-contributions.
But for the remaining taxable component, up to 15% tax can be imposed on the balance. Taxable components include employer contributions, salary-sacrifice contributions, investment earnings on the taxable portion, and personal contributions where tax deductions were made.
If you don’t have a financial dependent, you can nominate your legal personal representative and then create a will that details how you want your super to be paid in the future in case of death. You can even assign a financially independent individual to be your beneficiary through a binding nomination.
Nominating a Beneficiary
It’s possible to change beneficiaries or nominate additional individuals. Make sure the nominations are updated and reflect the changes you wanted.
There are two different kinds of nominations to consider when assigning a beneficiary of your super.
The lapsing binding nomination usually lasts for 3 years and can be renewed. On the other hand, non-lapsing binding nominations may never expire.
In the case of non-binding nominations, the trustee has the final say on who will receive your super benefits.
Preparing For The Inevitable
While it may be unpleasant to think and prepare for your death, it can be more frustrating to know that both you and your loved ones won’t be able to enjoy the money you’ve saved through the years. Instead of it being wasted and taxed without your loved ones benefiting from it, it would be better to see it put to good use by the family you’ve left behind.