Under superannuation legislation, if you do not have a valid binding death benefit nomination that directs the trustee of an industry or public superannuation fund as to where you want your death benefits paid from that fund on your death, the trustee has a discretion to make payments to any one or more of the following:
any person with whom you have an interdependency relationship; and
your legal personal representative (your estate to be dealt with in accordance with the terms of your Will).
However, in recent times public funds have been changing their policies in relation to how they deal with a member's death benefits.
For example, Zurich recently notified members that although Zurich would previously decide who, of a member's dependents and legal personal representative, would receive a member's death benefits not covered by binding death benefit nomination, their new policy from 1 July 2016 will be that any part of a death benefit not covered by a binding death benefit nomination valid under superannuation law at the time of death will be paid to the member's estate. This policy already applies to new members from 21 December 2015. Further, if the estate is insolvent, or if the legal personal representative cannot be identified within six months, the benefits will be paid to spouses, or, if there is no spouse, to the member's children, with payments made in equal shares where applicable.
Zurich is therefore changing its policy, where there is no valid binding death benefit nomination at the time of death, to specifically prescribe where the death benefit will go, which may not be the best outcome, particularly in circumstances where the estate may be subject to a family provision application after the member's death.
It is essential therefore that members of public and industry funds understand the current policy of their public or industry fund in relation to how their death benefits will be paid to ensure that the treatment of those death benefits aligns with their estate planning aims.