Q: My husband and I want to leave the money in our superannuation fund to our children and grandchildren but have been told our will would not cover this, so we have to put them on as beneficiaries on our super records. Is it true that our will won’t cover our super and if they do receive the money, would they have to pay tax?
A: There are basically two issues regarding what to do with your super when you die – what you can do and what you should do.
In terms of what you can do with your super, the basic rules are:
As a result of these rules, you cannot leave your super to your grandchildren unless they are your ‘dependants’ which, usually, they are not (although there are an increasing number of grandchildren who are falling into that category).
What constitutes an interdependent is more complex but broadly means someone who you support, or who supports you, financially, domestically or with care or with whom you have a close personal relationship. Interdependents don’t have to live together but a common interdependent relationship would be, say, an adult child who cares for an elderly parent.
In terms of tax, if you leave your super to your spouse, there will be no tax payable by them. However, if you leave it to your adult children, they will pay tax on it.
As for what you should do, that is a more complicated question that would need specific financial advice based on your particular circumstances. It would be usual to leave your super to your spouse initially and then to your adult children. But that is just the usual. There are many other circumstances where this may not be appropriate.
The first message is that the rules about super and dying are complicated. The second message is get good advice about what to do.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial situation, objectives or needs. That means it’s not financial product advice and shouldn’t be relied upon as if it is. Before making a financial decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services advice.