is a simple question with a complicated answer.
Most people are surprised to learn that their super is not automatically an
asset that they can gift in their Will, like a car or house.
This is because your superannuation is held by your super fund manager on
trust and this trust arrangement means you can’t simply direct who your
super should be paid to when you die.
That might seem like an inconvenience – and if you fail to make proper
provision for your superannuation in your estate planning it may form part
of your estate – but it can also add some flexibility to your estate
Special rules for
The trustee of your super fund has certain obligations upon your death
which includes paying your super entitlements only within a defined group
of beneficiaries. These eligible beneficiaries can include your
spouse or partner, your children, your financial dependants or your
While your super can end up in the hands of whoever you choose, the process
of how they receive that money will differ.
If your intended recipient is an eligible beneficiary, you can make a
nomination with your superannuation fund to have your super proceeds paid
directly to them. But if you want your super to go to someone else,
say a sibling, parent, or charity, then you must ensure your nomination and
your Will work together to achieve your intentions.
It is essential to note that if you try to nominate someone who is not an
eligible beneficiary or if you use the incorrect terminology, then your
nomination will not be enforceable.
Lets consider this scenario.
Jim died with no will, spouse, children or other dependants. His assets at
the time of his death were worth approximately $80,000 plus $450,000 of
benefits in a number of retail superannuation funds.
Jim was survived by his parents, who under the rules of intestacy, which
apply in Queensland when someone dies without a Will, were the
beneficiaries of his estate in equal shares. But his parents had an
acrimonious relationship after a divorce 30 years ago.
Because there was no Will appointing an executor, Jim’s mother applied for
and was appointed administrator of his estate.
Upon her appointment as administrator, Jim’s mother applied to the retail
superannuation funds for the superannuation death benefit to be paid
directly to her on the basis that she was in an interdependency
relationship with Jim.
That is, she argued that she was a member of that special group of people
that the superannuation trustee is obliged to pay superannuation proceeds
Her argument was based on facts including that Jim lived at home with her,
paid board and contributed to household costs. Jim also had some
health issues that meant his mother assisted him with some activities.
The trustees of the three retail superannuation funds accepted her claim
and paid all of the superannuation death benefit to her directly rather
than into his estate.
As a result, Jim’s father received half of only $80,000 instead of half of
$530,000 if arrangements had been in place to have Jim’s super paid to his
These are the actual facts of 2014 Supreme Court case of McIntosh v
McIntosh. Jim’s father went on to successfully challenge the super
distribution to Jim’s mother – but on grounds unrelated to the
superannuation rules. And no doubt the cost of doing so considerably
diminished the value of the estate overall.
You should therefore consider carefully how your superannuation will be
dealt with in your estate planning considerations. With the right
advice the unique properties of superannuation as an asset can be very
useful – but if left to chance it could produce considerable problems.
If you have any questions or would like more information please contact to
our Tax Structures and Planning team.