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Why is Superannuation not Part of your Estate?

February 07, 20241 min read

Superannuation is not automatically considered part of your estate upon death because it is held within a trust structure. This means it's managed by a trustee, usually a superannuation fund, which has its own rules and regulations that are separate from the laws governing personal estates.

When you die, the trustee of the superannuation fund decides who will receive your superannuation benefits. This decision is typically based on the beneficiary nominations you made while alive. There are two types of nominations:

1. Binding Nomination: This legally binds the trustee to pay your superannuation benefits to the beneficiaries you've nominated, provided the nominations are valid at the time of your death. This ensures that your superannuation goes to the people you've chosen.

2. Non-binding Nomination: This is more of a guide for the trustee. They will consider your wishes, but they are not legally bound to follow them. The trustee has the discretion to pay your superannuation benefits to your dependents or to your estate.

If your superannuation is paid to your estate, it then becomes part of your estate and is distributed according to your Will. However, if it is paid directly to a beneficiary, it bypasses your estate and is not subject to the same processes as your other assets, like property or bank accounts.

This separation can be beneficial in some situations, such as providing a way to pass wealth to beneficiaries while potentially avoiding some of the delays and costs associated with probate. However, it also means that careful estate planning is necessary to ensure that your superannuation is distributed according to your wishes.

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