Who's your Super Beneficiary?

Many LGBTQIA+ Australians have Super account balances receiving at least 10% of their wages annually.

As most super funds have Life Insurance attached to their member's account in some way, this ever-increasing pool of wealth is hard to ignore.

So if you're an LGBTQIA+ Australian with a Superannuation account, the next logical question is;

'Who's your Super Beneficiary?'

Jump Ahead

Why should you care?

Being able to legally nominate who your super account balance should go to if you die, is an essential part of protecting and providing for those you love.

Completing this one important step will make you feel more empowered, and the person you nominate secure in the knowledge if something unexpected happens in the future, there's a back-up-plan already in place.

This simple action can make a world of difference to your loved ones.

Why Super is different?

You might think nominating a beneficiary seems straightforward enough, there are several things you need to be aware of and plan for.

How a person's super fund payout is distributed after their death is a bit different to other financial assets.

• Because your Super is held in trust for you, it's not considered a personal asset.
• This means it cannot be gifted to somebody in your Will, but only distributed using a legal beneficiary nomination, made ahead of time.
• And a super death payout has special tax laws to determine if the person who receives the payout has to pay tax on it.

And if your life and relationships are a little more 'complicated', it's definitely better to talk with a financial adviser from Unusual Risks Insured about what you want to do.

3 Things that will happen if you don't nominate your Super beneficiary

When a person dies, in most cases their super fund pays their remaining super account balance to their nominated beneficiary. It's called a super death benefit payout.

But what if there is no beneficiary nominated?

1. The balance of your super account will be paid to your estate to be distributed according to your Will.
2. If you don't have a Will in place, the government will apply its own rules for deciding who should get what - (and you probably won't like their rules).
3. Most importantly, what's paid to your estate can be contested by ex-partners, estranged family members, greedy siblings and virtually anyone who thinks they deserve some of your money. And because the legal costs of contesting an estate are usually paid from the estate, these legal fees can quickly eat away the remaining value of an estate, even if a challenge is not ultimately successful.

Pro Tip: 
A person who dies without leaving a Will in place is said to have died intestate and the government's Rules of Intestacy have to be followed.
If you're one of the 76% of Australians who don’t yet have a Will, all your estate assets get tossed into the same pile and then divided up according to the government's Rules of Intestacy.
To make matters worse, these Intestacy Laws are not uniform Australia wide, so it’s a bit of a hit-and-miss affair and can become a source of heartache and sorrow for the modern Australian Family.

So what can you do?

Simply completing a nomination form and choosing your super beneficiary ahead of time can help eliminate uncertainty around who will get your super account balance.

How many beneficiaries can I nominate?

To split your benefit between multiple beneficiaries, you’d need to provide your super fund with a percentage breakdown of how the money should be distributed to the people you would like to leave your money to.

Does my beneficiary need to know they have been nominated?

Who can I nominate as my beneficiary?

Your super can only be paid out to an eligible beneficiary.

An eligible beneficiary is either a dependent, a financial dependent or your legal representative (ie: the Executor of your Will or Administrator if you have no Will, of your estate) and will need to be able to prove they meet the legal criteria required or face additional taxation requirements.

• For the purpose of super law, your Dependents can include your spouse or de facto partner (regardless of gender), your children (biological, adopted, step and ex-nuptial), or someone (regardless of gender) with whom you have an interdependency relationship. In most cases siblings are not considered dependents for super purposes unless financially dependent upon you.
• You can also leave your super to a Financial Dependent, which may include someone who relies on you to meet daily living expenses such as rent, utilities and household outgoings. This also covers anyone who shares your major financial commitments such as mortgage repayments.
• Your Legal Representative is usually the Executor of your Will or, if you have no valid Will the appointed Administrator of your estate.

Do Dependents pay tax on a super death benefit payout?

No. In general, super death benefits are tax-free when paid directly to dependents of the deceased.

Do Non-dependents pay tax on a super death benefit payout?

Yes. The rate of tax a person pays when receiving a super death benefit payout, depends on whether that person is considered a dependent or non-dependent under the relevant tax law.

• A person who is classed as a non-dependent under the relevant tax laws and who received a super payout via an estate will pay significant tax on that payout.

Caution - this can be a complex area and deserving of careful financial advice.  The potential taxation of super death benefits is complex and we strongly recommend you discuss the implications with us.

Special considerations for LGBTQIA+ people

Proving eligibility as a dependent and proving financial dependence.

• If you're part of a couple who are Living Apart Together you might not qualify under these definitions and additional legal advice might be needed.
• If you're part of a Polyamorous relationship, you might not qualify under these definitions and additional legal advice might be needed.
• If you've changed Partners since your last nomination was made and haven't updated your nomination, a former partner (and not your current one), could be entitled to the balance of your super fund death payout.
• If you're a Co-parent of your non-biological child and not living with them, additional legal advice might be needed as the child of a lesbian co-mother or gay co-father will have to prove financial dependence.

The different types of Super beneficiary nominations

• Binding nomination: a legally binding nomination gives you peace of mind your Super fund is legally bound to pay your benefit out exactly as you request. This type of nomination can be permanent or set to expire every three years.

• Non-binding nomination: you nominate your preferences for how your money should be distributed, and although the Trustee of a Super Fund will take that into account, the fund is not legally bound to follow your instructions. This type of nomination lasts forever and doesn't need to be updated until your circumstances or preferences change.

And if this all sounds too hard …

Relax.

Unusual Risks has a Update My Life & Super Policy Beneficiary Nomination Service specifically designed to help you add, change and review all your beneficiary nominations. Just another reason why LGBTQIA+ people choose to work with Unusual Risks Insured.

You can read more about our services here.

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