If you were to pass away unexpectedly, you would probably want your super to go to the people you care about most. But without careful end-of-life planning, there’s a chance it could wind up in the hands of someone unintended.

Doesn’t my Will have the final say?

Superannuation isn’t generally considered an estate asset, so if you’re counting on your Will to dictate where yours will go when you die, you might be disappointed. To have a say in how your super death benefit is distributed, you must nominate a beneficiary.

Super funds have strict rules around who counts as a valid beneficiary. Besides your legal personal representative (the executor or administrator of your estate), your super can only be paid out to a dependent as defined by superannuation law:

• Your spouse (including de-facto partner)
• Your children (including step children)
• A financial dependent
• A person with whom you have an interdependency relationship.

If you want your benefit to go to someone who doesn’t fit into one of these categories, you’ll have to nominate your legal personal representative (so your super benefit can be paid into your estate) and make sure your preferred recipients are specified in your Will.

Nominating an invalid beneficiary

If you haven’t made a death benefit nomination, or you’ve nominated a beneficiary your super fund considers invalid (for example a sibling or parent), it will fall to the trustee of your super fund to determine who receives your money.

While the trustee will consider your circumstances at the time of death, at the end of the day they have to distribute the money in accordance with super law, and that may not line up with your wishes.

One case of this happening involved a young law clerk named Ashleigh Petrie. Following her death in a motor vehicle accident, Petrie’s super fund paid the death benefit to her de-facto partner, despite her mother being listed as the beneficiary.

The decision was contested and a legal battle between mother and partner ensued. This dragged on for two years, only ending once the two parties agreed to a confidential settlement.

While it might seem unfair, your super death benefit can only be directly paid to a sibling or parent if they are financially dependent on you or in an interdependency relationship with you. In most cases, siblings and parents are unlikely to tick these boxes.

What’s more, even if your sibling or parent did qualify as a valid beneficiary when you made the nomination, they may no longer be eligible if the situation changes by the time of your death.

Allowing your nomination to become out of date

Along with who you nominate as a beneficiary, you’ll also need to be mindful about the type of nomination you make. A non-binding nomination will be treated as little more than a guide — the trustee of your super fund will consider it but ultimately is not bound to respect it.

A binding nomination provides more certainty, but given that these tend to expire after three years, you’ll need to make sure yours is renewed (or amended if necessary) at appropriate intervals.

There are plenty of ways an outdated nomination might create problems for you, such as if you listed an ex-partner as your beneficiary and forgot to change it once you split up. That’s why it’s a good idea to review your beneficiaries every time you undergo a major life change.

Take steps to avoid costly disputes

Confusion around who can be a valid beneficiary can put your loved ones in painful and problematic situations. According to the Australian Financial Complaints Authority (AFCA), there were 464 complaints about death benefits in 2021-22, and 54% were over how they were distributed.

Informed end-of-life planning can help you avoid these situations. To reduce the likelihood of your loved ones becoming embroiled in a drawn-out and stressful dispute, take time to review your nominated beneficiary to make sure they’re valid.