How Superannuation is Handled in Estate Planning

Superannuation is not automatically part of your estate when you die in Queensland — it must be deliberately planned for through your super fund and your estate strategy.  

Understanding how superannuation death benefits work is essential to ensuring your assets are distributed according to your wishes. 

Superannuation is often one of the largest assets a person holds, yet it is commonly misunderstood when it comes to estate planning. As superannuation is held in a trust structure, it does not automatically pass through your Will. Instead, it is governed by superannuation law and the rules of your super fund.

Whether you are in Brisbane, rural Queensland or further abroad, this makes strategic planning absolutely essential as failing to make appropriate nominations can lead to outcomes that don’t reflect your intentions. 

This article will outline the key considerations around superannuation estate planning in QLD, including how super death benefits work, who can receive them, the role of binding nominations, and how to integrate your super into your overall estate plan. 

What Are Super Death Benefits? 

Superannuation death benefits are payments made by your super fund after your death. They typically include: 

• The balance of your super account; and 

• Any life insurance held through your super fund 

These benefits can be significant and are intended to provide financial support to your dependants or other beneficiaries.

However, they are not distributed automatically via your Will unless specific actions are taken. Instead, your super fund’s trustee has the discretion to determine who receives the death benefits — unless you have made a valid Binding Death Benefit Nomination (BDBN). 

Who Can Receive Superannuation Death Benefits? 

Under the Superannuation Industry (Supervision) Act 1993 (SIS Act), only certain people are eligible to receive your super death benefits directly. These include: 

• Your spouse or de facto partner 

• Your children (including adopted or stepchildren) 

• Anyone financially dependent on you at the time of death 

• A person with whom you had an interdependency relationship 

• Your estate (legal personal representative) 

If none of these people are nominated, or your nomination is invalid or non-binding, the trustee of your super fund will decide where the money goes. This may result in delays, disputes, or even litigation among family members. 

What Is a Binding Death Benefit Nomination? 

A Binding Death Benefit Nomination (BDBN) is a legal document that directs your super fund trustee to pay your death benefit to specific beneficiaries. When valid and current, the trustee must follow this direction, removing any discretion they might otherwise have. 

There are two types of BDBNs: 

1. Lapsing nominations – These generally expire after three years and must be renewed to remain effective. 

2. Non-lapsing nominations – Some funds allow for non-lapsing BDBNs that remain in place unless revoked or changed. 

To be effective, your BDBN must be in writing, be signed and dated in the presence of two adult witnesses, clearly name eligible beneficiaries and be submitted to and accepted by your super fund.  

What Happens If You Don’t Make a Nomination? 

Without a valid BDBN, the trustee will decide how to distribute the benefits — possibly against your wishes. This is because the trustee has the lawful discretion to decide who receives your death benefit. This means benefits may be: 

• Paid directly to eligible dependants; or 

• Paid to your estate for distribution according to your Will 

However, this process can be time-consuming and contested, especially in blended families or complex relationships. If the trustee chooses to pay the super to your estate, it then forms part of your estate and is subject to any challenges or claims under the Succession Act 1981 (QLD). 

That is why aligning your super nominations with your Will and estate plan is critical to avoid unintended consequences. 

Including Superannuation in Your Estate Plan 

Because superannuation is not automatically dealt with under your Will, it must be deliberately integrated into your estate planning strategy. Here’s how: 

1. Make or Update Your Binding Nomination 

Ensure you have a current and valid BDBN in place. Review it regularly, especially after significant life changes (e.g., marriage, divorce, children). 

2. Decide Whether to Direct to Your Estate or Individuals 

There are pros and cons to each option: 

• Paying to your estate: Allows for control under your Will but opens the funds to estate challenges and creditors. Paying to your estate may also allow the monies to be inputted to testamentary trusts to derive the benefits that structure can provide, if you have signed a Testamentary Trust Will. 

• Paying directly to individuals: Can be faster and more private, with potential tax advantages. 

Each case is unique, and you should discuss with an estate planning lawyer or financial adviser which approach is right for you. 

3. Consider the Tax Implications 

Super death benefits can attract tax, depending on: 

• The recipient’s relationship to the deceased 

• Whether the benefit is paid as a lump sum or income stream 

• The taxable and tax-free components of the super 

Generally, dependants under tax law (e.g., spouse or minor child) can receive benefits tax-free. Non-dependants (including children that are not minors) may pay tax of up to 32% on the taxable component. 

4. Align With Your Will and Other Legal Documents 

Your Will, enduring power of attorney, trust arrangements, and super nominations should all work together. Any inconsistencies can lead to disputes and delays. 

Superannuation and Blended Families 

Blended families present particular challenges in superannuation estate planning in QLD. For instance, you may want to provide for your current spouse while also leaving something for children from a previous relationship. 

Without clear planning, your superannuation could end up in the wrong hands. A tailored strategy — such as using BDBNs in conjunction with testamentary trusts — can help ensure your wishes are respected and that all parties are treated fairly. 

Common Mistakes in Super Estate Planning 

When dealing with super death benefits, avoid these common errors: 

• Failing to make a nomination: This leaves everything to trustee discretion. 

• Outdated nominations: Changes in life circumstances can render previous choices inappropriate. 

• Invalid nominations: Not properly witnessed or submitted documents. It is important that you ensure your fund actually accepted the nomination. 

• Assuming your Will covers your super: It doesn’t unless you direct your super to your estate. 

• Ignoring tax implications: Can lead to unnecessary costs for beneficiaries. 

An estate planning lawyer can help ensure your documentation is valid, effective, and aligned with your broader objectives. 

Case Study: The Consequences of No Nomination 

Consider the case of Mark, a 58-year-old man from Brisbane who passed away unexpectedly. He had significant superannuation savings but never made a BDBN. His second wife and two adult children from a previous marriage disagreed over who should receive the super.

The trustee ultimately paid the death benefit to his current spouse, leading to a lengthy and emotionally charged legal dispute with his children. 

Had Mark made a valid BDBN or included his superannuation strategy in his estate plan, this conflict could have been avoided. 

Superannuation Death Benefit Nominations vs. Estate Challenges 

Even if your BDBN is valid and current, certain parties may still attempt to challenge your estate under Queensland law — especially if super has been paid into your estate. 

This is another reason to carefully consider whether your super should go directly to beneficiaries or form part of your estate. Legal advice is essential to minimise risk. 

Final Thoughts on Superannuation and Estate Planning 

Superannuation is a major financial asset that requires careful handling when planning your estate. It sits outside your Will by default, and unless you take deliberate action, the distribution of your super death benefits may not reflect your wishes. 

Whether in Queensland or elsewhere in Australia, ensuring your superannuation is properly addressed through binding nominations and integrated estate planning is critical — particularly in complex family situations or where large sums are involved. 

A qualified solicitor can help you make valid and strategic BDBNs and coordinate your super with your Will to avoid costly disputes and delays within your family.  

Ready to Protect Your Super? 

Ensure your superannuation is handled exactly the way you want. Contact Drakos & Company Solicitors for advice on superannuation estate planning in QLD. Our team can help you make secure and legally sound decisions for your future and your family’s peace of mind.