Most people have the bulk of their personal insurances namely Death and TPD cover within superannuation as this is both tax and cost effective. Apart from having enough cover to meet your needs in the event of your death or permanent disability it is important that we are aware of and are able to direct where the death benefit will be paid. In some cases if the nomination of a beneficiary for a superannuation benefit is not clear the funds
within your super may not reach the intended recipient and may even lead to expensive legal challenges from claimants.
Upon the death of a superannuation member it is the Fund trustee who is required to pay a death benefit as soon as is practical. Who they pay will be dependent on the instructions they have on hand from the member. The trustee is restricted by law (SIS Act) as to who can be paid a superannuation death benefit and these include a spouse, dependant child or a person who is financially inter dependent on the deceased individual.
The taxation of a death benefit from superannuation is influenced by who is receiving the payment, the method of payment and the superannuation components within the fund. The super fund will advise the member whether there are taxable components within the super fund at death. Determining if the individuals receiving the benefit pay tax will depend whether they are dependants of the deceased and the method of payment of the benefit.
Total value of superannuation benefits in The value of superannuation assets at the end of 2009 was $1.115 million according to Towers Watson (Sydney Morning Herald Feb 2nd
2010) and this suggests that for many people it is a valuable asset and the distribution at death is worth planning for. What should you do?
- Speak to your financial planner about nominating superannuation beneficiaries.
- Prepare a thorough and detailed Will.
- Check all your superannuation fund as even a small fund may have substantial insurance benefits attached making it a more substantial asset on death.
- Beware of the myths surrounding super death benefits eg that a death benefit will be paid to your immediate family in the event of death if there is no other nomination. The laws binding trustees on who can receive benefits are very strict.
This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances.