Key takeaways
Most Australians assume their super is part of their estate, but it’s actually held in trust by the super fund.
Unless you’ve made a binding death benefit nomination (BDBN) or directed it to your legal personal representative, the fund’s trustee decides who gets it.
Super can only be paid directly to a spouse, de facto partner, children, or someone financially or interdependently reliant on you.
If you want to leave your super to someone outside that group—like siblings, parents, or charities—you must do so via your estate and will.
Super paid directly to adult children is usually taxed, while routing it through your estate may reduce the tax burden.
Smart estate planning can save thousands by managing how and when beneficiaries receive super.
Most Australians treat their super as a “set and forget” investment — something they’ll worry about when they get closer to retirement.
But superannuation isn’t just about you.
It’s also one of the largest financial assets you’ll ever own, and if you don’t take control of where it goes when you die, it might not end up where you think it will.
Let’s look at why that happens and what you can do to make sure your super ends up in the right hands.
Disclaimer: The information contained in this article has been provided as factual and general advice only. The contents have been prepared without taking account of your objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this article, consult your own authorised financial advisor to consider whether that is appropriate having regard to your own circumstances, objectives, financial situation and needs.
Super isn’t automatically covered by your will
Here’s the first surprise for many people: your super isn’t automatically part of your estate.
It’s held in trust by your super fund, which means the trustee decides who gets it when you die, unless you’ve given them specific, legally binding directions.
You can instruct your fund to pay your super to a specific person or persons or to your legal personal representative (your estate’s executor), in which case it will be distributed according to your will.
But unless you’ve done that, your fund will apply its own rules and decide which eligible dependents receive it.
If you’ve got a straightforward family situation, that might work out fine.
But if you’ve remarried, have children from different relationships, or want to leave your super to someone outside your immediate family, things can get messy fast.
Who can receive your super directly?
The law limits who can be paid directly from your super fund. Generally, only:
- Your spouse or de facto partner
- Your children (of any age)
- Someone who’s financially dependent on you
- Someone with whom you have an interdependent relationship (like a long-term carer or companion)
If you’d prefer your super to go to a sibling, parent, or charity, you can’t do that directly; you’ll need to nominate your legal personal representative and deal with the distribution through your will instead.
That’s why it’s vital to have both a valid will and a clear super nomination that complement each other.
Binding vs non-binding nominations
You can nominate beneficiaries in a few different ways, but only one of them guarantees your wishes are followed:
- Non-binding nomination: This tells the trustee who you’d like your super to go to - but it’s just a suggestion. The trustee has the final say. This can happen if your BDBN lapses.
- Binding death benefit nomination (BDBN): This is a legally enforceable instruction directing the trustee to pay your super to the person or people you nominate.
- Reversionary nomination: If you’re already drawing a pension from your super, this lets you nominate someone (usually your spouse) to automatically continue receiving that pension when you pass away.
If you’ve got a self-managed super fund (SMSF), your instructions may instead be included in the fund’s trust deed, which makes it even more important to review the wording carefully and ensure the right person controls the fund after your death.
Under an SMSF you have an additional option of setting up an SMSF Will.
When a binding nomination makes sense
You don’t always need a binding nomination, but there are situations where it’s crucial.
For example:
- If you’re in a blended family and want your super to go to children from a previous relationship.
- If you want your current partner to receive your super, while your other assets go to your children.
- If you’re concerned your estate could be challenged, and you want to protect your super from being contested.
- If you want to route your super through your estate to manage tax outcomes or protect vulnerable beneficiaries (for example, a child with addiction issues or someone in a shaky marriage).
Without a valid BDBN, your trustee will decide, and while most act fairly, it’s not always the result you’d want.
The tax-smart way to handle super after death
There’s also a tax angle most people don’t think about.
If your adult children receive your super directly, it’s usually taxed, and the payout might even affect their own tax or Centrelink situation.
However, if your super is paid to your estate first and then distributed through your will, your executor can often handle the tax treatment more efficiently.
This approach can save thousands of dollars and prevent your super from inflating someone else’s taxable income.
Smart estate planning isn’t just about who gets what — it’s also about how much of it they actually keep.
SMSFs: Control is everything
For SMSF members, there’s an added layer of complexity.
Even if you’ve made a valid binding nomination, the trustee controls how and when benefits are paid.
That means you need to make sure control of your SMSF passes to someone you trust implicitly — and that the fund’s trust deed supports your nomination.
It’s one of the most overlooked (and dangerous) gaps in super estate planning.
When trustee discretion can be helpful
Sometimes, leaving some flexibility makes sense.
A binding nomination locks in your decision, but if life changes - a new marriage, separation, birth of a child - and you forget to update it, the wrong person could benefit.
By giving your trustee discretion, you give them the ability to consider your most up-to-date situation at the time of your death.
Of course, this only works if you’re confident your trustee (or successor trustee in an SMSF) will act in good faith.
Reversionary pensions: keeping the income flowing
If you’re already retired and drawing a pension from your super, a reversionary nomination lets your spouse continue receiving that income after you pass away.
That can provide financial security and avoid disruption, but it needs to be considered as part of your bigger estate and tax plan.
Reversionary pensions don’t trigger a “death benefit” payment, so they operate differently from standard nominations.
Keep your nominations up to date
The biggest mistake I see investors make is assuming their old nomination still reflects their wishes.
Life changes, marriages, divorces, children, and even changes to tax rules can all make your old nomination invalid or inappropriate.
It’s wise to review your nominations every few years and definitely after any major life event.
Don’t leave it until you’re retired, it might be too late to fix. Many BDBN only last three years so this is imperative.
If you have an SMSF a BDBN must be made exactly in accordance with the trust deed requirements or it may not be valid.
A final word
Your super could easily become one of your largest financial assets, often second only to your home.
But unless you’ve taken the time to direct it properly, it may not end up where you want it to.
A clear estate plan and a valid, up-to-date binding nomination can ensure your money supports the people you care about, not create confusion, conflict, or unnecessary tax bills.
As with most things in wealth creation, a little planning now saves a lot of pain later.
If you’re unsure what’s best for your situation, talk to the team at Metropole Wealth Advisory who understand both estate planning and superannuation strategy, not just one or the other.
At Metropole, we regularly help clients structure their wealth so that what they’ve worked so hard to build ends up in the right hands, in the most tax-effective way possible.
