When someone passes away, their superannuation doesn’t automatically form part of their estate the way most other assets do. This surprises many families at an already difficult time, and it means the process of claiming a superannuation death benefit often runs on an entirely different track to the rest of the deceased’s affairs. Understanding how this process works, and where disputes commonly arise, can help families avoid unnecessary delays or conflict.
Why Superannuation Is Treated Differently
Superannuation is held in trust by the fund, not owned outright by the member the way a bank account or property is. Because of this, a death benefit generally doesn’t automatically pass according to the deceased’s will. Instead, the trustee of the superannuation fund has discretion (within limits) to decide who receives the benefit, guided by the fund’s governing rules, any binding nomination the deceased made, and the definition of a “dependant” under superannuation law.
This is one of the most common points of confusion for families; having a valid, up-to-date will does not guarantee it controls what happens to superannuation. This is exactly why superannuation death benefits are usually considered separately from the rest of a person’s wills and estate planning, even though families often assume the two work the same way.
Binding vs Non-Binding Nominations
Most super funds allow members to make a beneficiary nomination, but the type of nomination matters significantly:
- A binding death benefit nomination legally compels the trustee to pay the benefit to the nominated person(s), provided the nomination is valid and up to date (most binding nominations lapse after three years unless renewed).
- A non-binding nomination is simply a guide for the trustee, who retains discretion to pay the benefit to any eligible dependant, regardless of what the nomination says.
Where no valid nomination exists, or where a nomination has lapsed, the trustee will make its own determination based on who qualifies as a dependant and, in many cases, will invite competing claims from multiple potential beneficiaries before deciding.
Who Can Receive a Death Benefit
Superannuation law defines “dependant” more broadly than many people expect. Generally, this includes:
- A spouse or de facto partner (including same-sex partners)
- Children of the deceased, of any age
- Anyone who was in an interdependency relationship with the deceased (such as a close relative who lived with and relied on them)
- Anyone who was financially dependent on the deceased at the time of death
This means a superannuation death benefit can sometimes be claimed by, or paid to, someone who isn’t a beneficiary under the deceased’s will at all, which is precisely where disputes between family members most often arise.
When Disputes Arise
Because trustees have discretion, and because eligibility as a “dependant” isn’t always clear-cut, disputes over super death benefits are common in situations involving:
- Blended families, where a surviving spouse and adult children from a previous relationship both have competing claims
- Estranged family members who technically still qualify as dependants
- Lapsed or ambiguous binding nominations
- Claims from someone in a de facto or interdependency relationship that wasn’t formally disclosed to family members
If you believe a trustee’s decision doesn’t properly reflect the deceased’s wishes, or that you’ve been wrongly excluded as an eligible dependant, there is a formal process to challenge a trustee’s determination, generally beginning with a complaint to the Australian Financial Complaints Authority (AFCA) before any court action becomes necessary. Time limits apply to these complaints, so it’s important to act promptly rather than waiting until other estate matters are resolved.
Superannuation and TPD Claims Made While the Person Was Alive
It’s also worth noting that unresolved superannuation claims, including a Total and Permanent Disability (TPD) claim that was in progress before the person passed away, can sometimes still be pursued by the estate or dependants after death. This is a distinct but related area we handle as part of our superannuation and TPD claims work, and it’s worth raising early if the deceased had an outstanding claim at the time of their passing.
What Families Should Do Early
If you’re navigating a superannuation death benefit claim, it’s worth:
- Locating any binding nomination on file with the fund as early as possible
- Notifying the super fund of the death promptly, since this starts their internal process
- Getting legal advice before accepting a trustee’s initial determination, particularly in blended family or estrangement situations
- Understanding that this process runs separately to, and can take considerably longer than, the administration of the rest of the estate
Contact McDonnell Schroder
If you’re dealing with a superannuation death benefit claim, whether you’re the nominated beneficiary, a dependant who believes you’ve been overlooked, or an executor trying to understand how it fits with the rest of the estate, our team can help. Call us on (02) 9622 1155 or get in touch online to arrange your first consultation.
