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Superannuation is meant to help us pay our way in retirement. So, what happens when a member of First Super dies with money still in their superannuation account?
In most cases the money, plus any relevant insurance, is paid to the member’s dependant(s) or Legal Personal Representative. This payment is called a “death benefit”.
If you are wanting to claim a death benefit left by a First Super member who has died, this is what you need to know.
There are strict rules around who can receive a death benefit – and who can’t. Make sure you know the rules before making a claim.
We can only pay a death benefit to someone who is a dependant of the member who has died, or to the member’s Legal Personal Representative.
You should read Nominate who will receive your super to see who is considered a dependant – and who is not.
There are two common scenarios.
If the member nominated a dependant or Legal Personal Representative before they died, and their request was:
then we will follow the member’s instructions about where to pay their benefit.
In this scenario, any valid beneficiary would be considered a dependant for super purposes. A Legal Personal Representative does not have to be a dependant.
In this case, things work a bit differently.
If there is no binding nomination, unfortunately there is a chance we may not pay the deceased member’s benefit to the person they would have chosen. We will consider their circumstances, including any non-binding nominations or other instructions, but ultimately, we must follow superannuation laws and our Trust Deed when making this decision on the member’s behalf. The main things we consider are:
First Super member Anika dies suddenly at age 60, leaving behind her de facto partner and two adult children from a previous marriage. Anika’s de facto partner and two children all make claims for her death benefit, but First Super decides to only make a payment to her de facto partner.
This is because, as her de facto partner, they lived together, shared income and domestic duties, and it’s reasonable to expect this would have continued if Anika hadn’t died. Anika’s children both live and work away from home and had no financial dependency on their mother. As such, they are not entitled to the death benefit.
If you believe you are an eligible dependant of a member who has died, you can make a claim for their death benefit payment. Note – multiple people may be eligible and may claim.
The first step is to contact us on 1300 360 988. You may be the one notifying us that the member has died, in which case we will need:
This information will help us check if we can start a claim for you. If we can, we will provide you with the relevant paperwork and instructions for what to do next. Once you have submitted your claim, we will review it, along with any other claims we have received.
If your claim is successful, we will write to you to let you know. The death benefit will be paid as a lump sum, unless the recipient is a reversionary beneficiary – that is, a person chosen by a pension member to keep receiving their income from super after they have died.
Unfortunately, there is no easy answer to this. We know this is a distressing time and we will make every effort to process death claims as fast as possible. But paying a claim can take a few weeks to a few months – and sometimes longer. It depends how complex it is.
If the member had a valid binding nomination in place, we only need to wait for the beneficiary to provide any necessary paperwork, and the insurer to approve payment of any insured portion of the benefit. After that, we can generally process and pay the claim quickly.
When there is no binding nomination, First Super must identify and review potential dependants who could be eligible for a death benefit payment. This can be a lengthy process, as we must consider the member’s circumstances before they died, their relationships, and any wishes or instructions they may have left behind.
We must also consider the eligibility and fitness of potential recipients. For example, if there is a minor child receiving the death benefit, who will be entrusted to manage this income for them?
After we make our decision, we will share this with the person or people who have made a claim. If there is more than one claimant, there is then a period of 28 days where claimants can object if they do not agree with what we have decided. We must take these objections seriously, including looking at any new evidence provided to us.
If we pay a death benefit to a member’s estate rather than a dependant, we usually require Probate or Letters or Administration before the member’s assets can be distributed. (Smaller estates under $30,000 may only require a Statutory Declaration.) There can be delays in receiving these court documents, which can draw out the claims process.
When a member of First Super dies with:
this needs to be paid to an eligible person as soon as possible, usually as a lump sum.
If we are paying to a beneficiary, we will deduct any relevant fees and taxes and add any relevant contributions and interest. We’ll use the current interest rate to do this. (Note – if we are paying to an estate, we will not deduct tax. The Legal Personal Representative will need to lodge a tax return for the estate.)
You should know the deceased member’s super will continue being invested in their current investment option(s) during the claims process. (The investment options cannot be changed after the member has died.) So depending on how investment markets perform, the final amount that is paid out could change.
Depending on your relationship with the deceased member, you could be taxed differently on any payment you receive.
This is because someone who is considered a dependant for the purposes of receiving a super death benefit payment may not be considered a dependant for tax purposes.
A “tax dependant” person is limited to the following:
Lump sum death benefit payments made to a tax dependant are tax-free. Income stream payments are treated differently and may include a taxed portion.
Adult children are not generally considered tax dependants, so would have to pay tax on any benefit they received.
There are some exceptions. For example, if an adult child was financially dependent on or in an interdependent relationship with the deceased member, or had a disability and was financially dependent on the member at the time of the member’s death, the payment would be tax-free.
You can find out more about how super death benefits are taxed on the ATO website.
Murray is 70 years old and receiving an income from his First Super account when he dies. Murray and his ex-wife divorced 10 years ago. They have three adult children together.
Murray’s children make claims for his super death benefit. First Super reviews Murray’s circumstances and decides neither his ex-wife nor his children had a financial dependency on Murray. The benefit is split three ways between Murray’s children. They are not considered dependants for tax purposes, so will have to pay tax on the money they receive.
This is up to you.
You don’t need a lawyer to apply for a death benefit, and First Super can help you work out whether you could be eligible to claim.
However, if you are objecting to our decision, or feel you need someone to represent you, you may wish to contact a lawyer for help. Read more about Do you need a lawyer to make a claim?
If you are have any questions about claiming a death benefit, or any other type of claim, please call our Member Services Team on 1300 360 988, or email us.
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