Of recent times some guidance was offered by the Superannuation Complaints Tribunal regarding the payment of death benefits from superannuation funds. This guidance highlighted some common misunderstandings, the most common relates to the purpose of superannuation.
In a broad sense, the purpose of superannuation is to provide retirement income to members as opposed to forming part of a person’s estate. Accordingly it is preferable to have the superannuation death benefit paid to the dependent or others who have a legal or moral right to the deceased rather than to the estate of the deceased. Some of the advantages to this approach are listed below.
- When a death benefit is paid directly to the dependants it is not available to creditors who may be paid first from the assets of the estate
- When paid from superannuation, the death benefit will generally reach the beneficiaries quicker than letters of administration or a grant of probate
- As a general rule, superannuation death benefits are protected from bankruptcy.
Thus even if the deceased member was bankrupt, or if the estate is insolvent, funds can be paid direct to the dependants to replace the income stream that may be lost as a consequence of the death.
To ensure that superannuation is distributed a certain way then it is important for a member to communicate with the trustee of the fund to determine if their superannuation fund has the option to issue a binding nomination and if so, to identify and to meet the ongoing requirements for a binding death nomination.