What happens to your super and life insurance when you die?

A superannuation death benefit is the amount left in your super fund account after you die. This will not automatically form part of a person’s estate and will ordinarily be paid to the person who is nominated under a death benefit nomination. Provisions can be made in a will that a death benefit forms part of your estate. This is, itself, not binding on the trustee of your superannuation fund, however. If you want your superannuation to be left under your will then you must also give your superannuation fund trustee a binding death benefit nomination which states that on your death your superannuation death benefits should be paid to the executor of your estate. If your death benefit nomination is non-binding, however, the Trustee of the Superannuation Fund can decide whether to comply with it or whether to distribute the death benefit to other close relatives specified in the superannuation law.

The same applies to life insurance that is held outside a superannuation fund: the benefit of the policy will not form part of your estate if you have nominated a beneficiary to receive your life insurance on your death. If you want your life insurance to be paid to the executor and dealt with as if it forms part of your estate, then you should either not nominate a beneficiary or nominate “the executor of my estate to be dealt with in accordance with the terms of my will” as the beneficiary of the policy. In that case you will should also contain a clause stating that if your executor receives any proceeds from a life insurance policy they must deal with that in the same way as your estate.

If you don’t have a will then the risks of your superannuation and life insurance policy proceeds ending up in the wrong hands are considerably increased.