Deceased Superannuation Claims

Deceased Person’s Superannuation: How to Claim a Death Benefit

Dealing with the death of a loved one can be a difficult experience. If the deceased has a superannuation fund, then it is important to understand how to claim a death benefit from the super fund. In Australia, a death benefit is a payment made by a super fund to the dependant or legal personal representative of a deceased person. This article provides an overview of how to claim a superannuation death benefit and who may be eligible to receive it.

What is a Death Benefit and How to Claim it?

Understanding the Death Benefit

A death benefit is the amount of money that a superannuation fund pays to the beneficiaries of a member who has passed away. It is payable when a member dies and is paid out of the super fund. The death benefit can include any superannuation benefit that was payable to the member at the time of their death, as well as any life insurance or other benefits payable from the super fund.

To claim a death benefit, the person making the claim needs to be either a dependant of the deceased or the legal personal representative of the deceased estate. The claim must be made with the trustee of the superannuation account of the deceased person. If the deceased has made a binding nomination, then the trustee is expected to benefit the nominated beneficiaries. However, if there is no binding nomination, then the trustee has discretion to decide who should receive the death benefit.

The Australian Taxation Office (ATO) oversees the tax treatment of a death benefit payment. The tax treatment of a death benefit will depend on whether it is paid as a lump sum or an income stream, and whether the beneficiaries are dependants or non-dependants of the deceased. The tax-free component of the benefit is paid tax-free, while the taxable component is subject to tax.

Only certain people are eligible to receive a death benefit from a super fund. These include the dependant of the deceased, the legal personal representative of the deceased estate, or any person who was nominated by the deceased under a binding nomination. A dependant includes the spouse, de facto partner, child, or any person financially dependent on the deceased. If the deceased did not make a binding nomination, then the trustee of the super fund has discretion to decide who should receive the death benefit.

If the deceased did not make a binding nomination and the trustee of the super fund cannot find a dependant or legal personal representative to pay the benefit to, then the benefit may be paid to the estate of the deceased person. The executor of the deceased estate will then distribute the benefit according to the terms of the will or the laws of intestacy.

If there is no dependant or legal personal representative to claim the death benefit, then the benefit may be paid to the legal heirs of the deceased person’s superannuation fund. The legal heirs are the people who are entitled to inherit the deceased person’s assets under the relevant state or territory laws.

Difference Between a Lump Sum and Income Stream Payment

When a death benefit is paid from a super fund, it can be paid as a lump sum or an income stream. A lump sum payment is a single payment of the whole benefit, while an income stream is a series of regular payments over time. The choice between a lump sum or income stream payment will depend on a number of factors, including the tax implications, the age of the beneficiaries, and their financial needs.

If the beneficiaries of the death benefit are dependants of the deceased, then they may be eligible to receive a tax-free income stream payment. This is because the income stream is paid using the deceased person’s tax-free component of their super benefit. However, if the beneficiaries are non-dependants, then the income stream is subject to tax.

Tax Treatment of a Death Benefit Payment

The tax treatment of a death benefit payment will depend on a number of factors, including the age of the deceased person at the time of their death, the age of the beneficiaries, and whether the benefit is paid as a lump sum or income stream. In general, the tax-free component of the benefit is paid tax-free, while the taxable component is subject to tax.

Process of Making a Death Benefit Claim

To make a death benefit claim, the person making the claim needs to complete a claim form and provide supporting documentation to the trustee of the super fund. The trustee will then assess the claim and decide who should receive the benefit. If there is a binding nomination in place, then the trustee is expected to follow the nomination. If there is no binding nomination, then the trustee will use their discretion to decide who should receive the benefit.

Role and Responsibility of Trustees in Death Benefit Claim

The trustee of a deceased estate has a responsibility to act in the best interests of the beneficiaries of the super fund. This means that they need to assess the claim and determine who should receive the death benefit. The trustee also has a responsibility to ensure that the benefit is paid in a tax-efficient manner and that the correct documentation is provided to the ATO.

Importance of Seeking Legal Advice when Making a Claim

When making a death benefit claim, it is important to seek legal advice to ensure that the claim is made correctly and that the benefit is paid to the appropriate person. A lawyer can help to prepare the claim and provide advice on the tax implications of the payment. This can help to ensure that the benefit is paid in a tax-efficient manner and that the beneficiaries receive the full benefit that they are entitled to.

Overall, claiming a death benefit from a superannuation fund can be a complex process. It is important to understand the eligibility criteria for receiving a benefit, the tax implications of the payment, and the process for making a claim. Seeking legal advice can also help to ensure that the claim is made correctly and that the benefit is paid in a tax-efficient manner.