Many people assume their will controls what happens to all their assets when they die. Superannuation can be different.

A superannuation death benefit does not automatically form part of a deceased person’s estate. It may be paid directly to an eligible beneficiary or to the deceased’s legal personal representative.

This means a person’s will and superannuation arrangements can produce different outcomes.

A will may not control your superannuation

A will governs the assets belonging to the deceased estate.

Superannuation is held by the fund’s trustee. The trustee must deal with the death benefit according to superannuation law, the fund’s governing rules and any valid death-benefit nomination.

If the benefit is paid directly to a beneficiary, the directions in the will may not determine who receives it.

That is why a will should not be reviewed on its own.

Check the death-benefit nomination

A death-benefit nomination tells the trustee who the member wants to receive their superannuation.

Depending on the fund, the nomination may be binding or non-binding, and it may lapse after a certain period.

A nomination may not work as intended if it:

  • has expired;
  • does not comply with the fund’s rules;
  • has not been completed correctly; or
  • names someone who cannot receive the benefit directly.

The nomination should be reviewed regularly and whenever family circumstances change.

Who will control the SMSF after death?

Control is particularly important where superannuation is held through a self-managed super fund.

After a member dies, the surviving trustee or the directors of the corporate trustee may be responsible for decisions about the death benefit.

If control passes to someone whose interests differ from the deceased member’s wishes, a dispute can arise.

This was seen in Ioppolo & Hesford v Conti.

The wife’s will expressed a wish that her superannuation benefits pass to her children rather than her husband. However, the superannuation was held through an SMSF, and her husband remained involved in controlling the fund after her death.

The case shows why expressing a wish in a will may not be enough.

Three things to review

1. Is the death-benefit nomination current and valid?

Check that it has been completed correctly, has not expired and reflects the intended outcome.

2. Do the documents work together?

The will, SMSF deed, death-benefit nomination and related estate-planning documents should be reviewed together.

3. Who will control the fund after death?

Consider who will act as trustee or control the corporate trustee when a member dies.

Estate planning is not only about preparing a will. It also requires an understanding of which assets fall into the estate, which assets pass outside it and who will control the structures holding those assets after death.

The objective is to make sure the will, superannuation arrangements and control positions all work together.