Can you leave your super to your grandchildren?
Many grandparents wonder if they can leave their superannuation to their grandchildren. Superannuation, or "super," is a key part of retirement savings in Australia, and its rules can be tricky. So, can a grandparent pass their super to a grandchild? The short answer is - rarely. But there is a solution. A binding super death benefit nomination in favour of your estate can allow you to bequeath your super to whomever you please. Just ensure your will clearly states who you want to inherit your super.
Who can receive super death benefits?
Super death benefits are the funds paid out from a person’s super account after they pass away. These benefits can only go to certain people, being dependents under superannuation law. Dependents include a spouse, children under 18, and anyone who was either in an interdependency relationship with the deceased or financially dependent on them. For a grandchild to directly receive their grandparent’s super upon their passing, they need to be in an interdependent relationship or financially dependent on the grandparent.
What is an interdependency relationship?
An interdependency relationship happens when two people have a close personal relationship and rely on each other in specific ways.
An interdependency relationship exists between two people if:
- they have a close personal relationship
- they live together
- one or each of them provides the other with financial support, and
- one or each of them provides the other with domestic support and personal care.
What does financial dependency mean?
If the grandchild doesn’t meet the interdependency rules, they could still qualify as a financial dependent. This means they relied on the grandparent for necessary financial support, especially for basics like food, housing, or clothing. It’s not just about getting money – it’s about needing that money to get by. A grandparent paying school fees won’t be enough to satisfy this requirement.
The third option: Super paid to your estate
Even if a grandchild doesn’t qualify as a dependent, there’s still a way for super benefits to be passed to them – through the estate. When you pass away, you can arrange for your super death benefit to be paid to your estate via a binding death benefit nomination. A binding nomination is like an instruction to your super fund to pay the death benefit to a particular dependent or your estate. You can use your will to ensure your grandchild inherits part of your estate, including your super funds. So always make sure that your will is up to date. This approach bypasses the strict rules for direct payments to super dependents.
Leaving super to grandchildren is tricky since they rarely qualify as dependents meaning a super fund may not be able to pay them directly. Instead you may use a binding nomination to direct super to your estate, then allocate it to your grandchild via your will. Professional advice is key so give us a call if you need help navigating super death benefits.
