You may have heard in the news recently about Daniel Leverton, a young man who died unexpectedly. Various people have expressed outrage over the fact that his girlfriend of nine months ended up with around $350,000.00 of his superannuation and life insurance, while his two young daughters only received around $50,000.00 each. 

Given the amount of attention this has attracted, we thought that we would explain: 

  1. The process of dealing with superannuation on someone’s death; and
  2. How to avoid your superannuation and life insurance going to someone that you do not intend it to go to.
Most of us have superannuation, and often, there is a life insurance policy attached to this. If you read your superannuation statements you may notice that a premium is paid from your superannuation balance periodically towards the life insurance policy. If you pass away, the amount of your superannuation balance at the time, plus the proceeds of any life insurance policies are referred to as your “death benefit.” If you have your superannuation in multiple funds, then you could have multiple life insurance policies that are all payable on your death. A lot of people who think that they do not have many assets and do not need estate planning advice, actually have a death benefit worth hundreds of thousands of dollars – even very young people who have only been in the workforce for a very short period of time.
 
Any good estate planning lawyer will point out to you that your Will applies to your “estate” but that certain assets may fall outside of your estate. For example:
  1. Some joint property will automatically go to the surviving joint owner on your death regardless of what your Will says;
  2. If you have a life insurance policy outside of superannuation that is set up to be paid to a particular beneficiary rather than your estate, it will go to that beneficiary; and
  3. Assets in family trusts are not able to be “gifted” through a Will (although you may be able to pass control).
 
A Superannuation death benefit is another asset that falls outside of the estate, unless you have made particular arrangements to ensure that it is paid to your estate.

Who is entitled to claim your death benefit?

Your spouse, children, anyone classed as your dependant and your executor (on behalf of your Will/estate) can make a claim for your death benefit.  The definition of “spouse” for the purposes of superannuation law includes anyone living with you as a de facto at the time of your death regardless of the time period. Also, if you are still married to someone that you are separated from, they will still fit within the category of “spouse”.
 
Death benefits can only be paid to one or more of the above persons. Accordingly, if you wanted your death benefit to be paid to a sibling that is not your dependant, then the death benefit would need to be paid to your estate so that you can then deal with this in your Will.
 
If you want to make sure that your death benefit goes to any combination of these people, then you need to have a valid “binding death benefit nomination” (BDBN) in place at the time of your death. A BDBN removes the discretion of the superannuation fund. It needs to be completely properly and properly witnessed otherwise it may not be valid. BDBNs will also usually lapse every three years and may have to keep being renewed.
 
If you do not have a valid BDBN in place at the time of your death, your Superannuation Fund decides who and how (out of that group) receives your death benefit.
 
You can have nominations that are not binding (for example where you have selected your beneficiaries online) and in this instance the Superannuation Fund will still make the decision on who gets your death benefit (which may be a different person than who you actually nominated)! If you have nominated someone ineligible – for example a non-dependant such as a sibling, then again, the fund will make the final decision.  If your fund does not allow BDBNs, you may want to consider changing funds.
 
In our experience, Superannuation funds tend to favour spouses (both married and de facto) over other beneficiaries (such as children or other dependants). Accordingly, the decision about Mr Leverton’s death benefit is not unusual and there would be many similar cases out there. Superannuation funds often will not pay a death benefit to an estate to be dealt with through the Will where various people are claiming.
 
It is important for everyone to get good estate planning advice, about not only their death benefit, but about all of their assets. This is so that they can hopefully avoid their money going to someone that they do not intend to receive it. People may also consider getting professional tax advice about how they structure their estate planning. Estate planning is not simply about having a basic Will, it should also be about obtaining a holistic view of your affairs and putting measures in place suitable for you and your particular situation.
 
If you are interested in finding out more or would like to have your Estate Plan created or reviewed, please do not hesitate to contact us to discuss further.
 
At McKays, we have our own team of experienced estate planning lawyers that can assist you with creating or reviewing your Estate Plan.  Contact us today for more information.