Who will inherit your super?

Safeguarding your super is important, and so is protecting your intended beneficiaries.

Many Australians pass away and leave behind a substantial amount of the superannuation they accumulated throughout their working life.

Some pass away before meeting one of the conditions of release for their super, such as reaching preservation and retiring. Then there’s the majority of people who are in retirement and pass away before spending down the full balance of their savings.

Treasury’s Intergenerational Report 2026 found many retirees retain substantial super balances at the end of their lives.

“This may be for multiple reasons, including complexities of navigating the superannuation system, the fear of exhausting savings and the ‘nest egg’ framing of superannuation,” the report found.

Treasury noted that the median super balance for people aged 65 and over in the year before death in 2022–23 was $76,000, with around a quarter of balances exceeding $250,000.

So, what actually happens to your super when you die? The answer to that largely comes down to how well you’ve planned ahead, and the reality is that most Australians overlook this very important component of their estate planning.

How unspent super is treated

Understanding how your super and insurance benefits are treated under the law is important.

The Superannuation Industry (Supervision) Act 1993 stipulates that your super death benefits can only be paid directly from your super fund to specific types of dependants or your legal personal representative.

These dependants include:

• Your married spouse, de facto or same-sex partner.
• Your children, adopted children, stepchildren, children of your spouse or other legally recognised children.
• An ‘interdependent’, meaning someone you live with in a close personal relationship, where one or both of you provide financial, domestic and personal care support to the other.
• Your legal personal representative, who will be the executor of your will or administrator of your estate. They are not considered a dependant as such but can still be nominated as a beneficiary.

Parents, siblings and other individuals are generally paid via your estate unless they qualify as a superannuation dependant, such as through an interdependency relationship.

Nominating your super beneficiaries

Recent research by independent superannuation advocacy group Super Consumers Australia found that a high percentage of Australians have not specifically nominated who will receive their super balance and insurance benefits when they pass away.

If you haven’t nominated a beneficiary, your super does not automatically follow your will (if you have one).

You’re able to nominate the beneficiaries of your super and death benefits within your super account.

A binding death benefit nomination is a legally enforceable direction to the trustee to pay your benefits to eligible dependants or your estate. This allows you to leave everything to one dependant, such as your spouse or partner, or to split your benefits (by percentage) across multiple dependants as you see fit.

A non-binding death benefit nomination indicates your preferences, but your super fund trustee still retains discretion over who to pay it to.

If you have not made any beneficiary nomination at all, the trustee of your super fund may use their discretion to decide which dependant or dependants to pay your super and death benefits to.

Alternatively, your super fund may pay your super and death benefits to your legal personal representative for distribution according to the instructions in your will.

There are a range of potential complications if no beneficiary has been nominated.

In such a situation, super trustees must identify all potential dependants, assess relationships and financial interdependency, and then decide who is most appropriate. This may involve requesting information from family members before they make a decision, which can significantly prolong the overall payout process.

Talking with your beneficiaries

What happens to your assets when you die, including your super and death benefits, is rarely discussed at the family level.

Most families regard subjects such as death and the future division of wealth as unpleasant, and potentially sensitive when multiple beneficiaries are involved.

But there’s a lot to be said for having open discussions within your family about the intended treatment of your super and benefits while you’re still around to have that conversation.

One of the most effective ways of helping ensure any super you have left at the time of your death is distributed according to your wishes is to complete a binding death benefit nomination and provide it to your super fund.

Seek professional advice

When nominating beneficiaries, it’s important to be aware of any potential tax implications. For example, while super distributed to a surviving spouse or dependant minor children is generally tax free, non-dependants (including your adult children) may be required to pay tax on amounts they receive.

That comes down to how much of your super is taxable and tax-free.

Estate planning can be complex. Consulting a licensed financial adviser to help you and your intended beneficiaries map out an inheritance framework that also identifies issues such as potential liabilities is a prudent step.

For further information on death benefit nominations, you can contact a member of the legalsuper national Member Services Team.

Send us a message, book an appointment, or call us on 1800 060 312.