Who is a dependent for the purposes of your superannuation death benefit?

A previous article published ‘What happens to your superannuation when you die’ provided a general understanding of the distribution of your superannuation when you die. As a refresher, you have the ability to nominate a beneficiary on your superannuation policy, commonly called a ‘Death Benefit Nomination’, which ensures that your super death benefit will be paid out to your nominated beneficiary once you die.

If you fail to nominate a beneficiary, then the Trustee of your superfund will pay your death benefit to your estate or they may utilise their discretion to determine which eligible beneficiaries the money should be paid to.

It is important to note that the Trustee can override a Death Benefit Nomination if it does not comply with the Superannuation Industry (Supervision) Act. A recent case concerning Magistrate Rodney Higgins and his relationship with his court clerk Ashleigh Petrie who was 45 years his junior, demonstrated the ability to overturn a valid Binding Death Benefit Nomination when it does not comply with superannuation law.

Ms Petrie was hit by a car on Monday 28 October 2019, just weeks after the announcement of her relationship with Mr Higgins went public in the newspapers. It was during her seven-month relationship with the Magistrate that she completed a Death Benefit Nominated which nominated her mother as the beneficiary of her superannuation and life insurance held with her superfund, Rest Super.

Despite there being a valid Binding Death Benefit Nomination in place, Mr Higgins challenged the nomination on the basis that he was Ms Petrie’s de facto partner, which meant he would be a dependent and entitled to the death benefit for the purposes of superannuation law. Under the Act, the beneficiary you nominate must be a dependent, such as your spouse, child or children over the age of 18 years or an individual with an interdependency relationship on the deceased.

Mr Higgins and Ms Petrie had only been together for approximately seven months and lived together for four months prior to her death. They became engaged in September 2019. The Act does not explain what constitutes an interdependency relationship for the purposes of superannuation death benefits, however under Australian law, generally a couple is deemed to be in a de facto relationship when two people live together on a genuine domestic basis and for a period of approximately 2 years.

As a result of their brief engagement, Mr Higgins was awarded the $180,000 death benefit payout. Ms Petrie’s mother is appealing the decision.

This case demonstrates the importance of ensuring, firstly, that you have a death benefit nomination in place with your superfund, but also the importance of ensuring that the nomination you have made is valid and complies with the relevant legislation.

Image Credit - Hyejin Kang © Shutterstock.com