Following my blog on the proposed changes to superannuation, I thought it would be a good time to debunk some common myths about what happens to your super when you die.


myth 1: super is part of your estate

Many people believe that their superannuation will be managed through their will and estate. However, this is not the case. Superannuation will only become part of your estate if you specifically direct it there, regardless of whether it’s part of a retail, industry, or self-managed super fund. Note – there’s much more to estate planning than just a will!


myth 2: super is tax-free once someone dies

People are often unaware of the tax implications on superannuation upon death. The amount of tax that needs to be paid and the strategies put in place can significantly impact the outcome. In most cases, a spouse or minor child can inherit your super tax-free. However, if your estate plans are not up-to-date, your super may be subject to unnecessary taxes. Adult children usually pay a maximum rate of 17% on a death benefit received from a parent’s super. Proper planning can help reduce the tax burden on your loved ones.


myth 3: everyone should have a binding nomination

A binding nomination locks the trustee into paying out your super to specified individuals. While this can be beneficial in some cases, it can also be disastrous in others. In some situations, allowing the trustee to have flexibility based on your circumstances at the time may be more advantageous. Proper planning and regular reviews of your situation are essential to avoid potential issues.


myth 4: control of a self-managed super fund [SMSF] passes to your executor

Control of an SMSF can pass in various ways, so it’s crucial to understand who will gain control of your fund if you’re an SMSF member. Many lawyers may not address the SMSF component when reviewing an individual’s overall estate plan. Combining this with Myth 1 could result in your wealth not being distributed as you intended.


final thoughts

Superannuation and estate planning are complex and require personalised advice. It’s essential to review your superannuation affairs and ensure you understand where it will go and how it will be managed upon your passing.


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This blog was first published in April, 2023. 


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