For many families super is the largest asset after the home, often with life insurance attached, yet it sits outside the will unless you take steps to bring it in. This guide explains how super is paid on death, how nominations work, what changes in an SMSF and how tax affects the choice.

We use the Doe family as an example. Jane (48) and John (50) Doe are married and live in Western Sydney. They have 2 children, Mia (19, at uni) and Leo (15), and John has a son, Sam (24), from a previous relationship. Jane has $350,000 in a retail super fund plus $500,000 of life cover inside it. John has his own SMSF, the Doe Super Fund, which owns a small warehouse leased to his company, Doe Plumbing Pty Ltd. Jane and John are its 2 individual trustees.

Does my will cover my super?

No. Super is held on trust by the fund trustee, so it is not your property and does not automatically form part of your estate. When you die, the trustee decides who receives it, following a valid binding nomination if you have one, and using its own discretion if you do not.

Super only passes under your will if it is paid to your legal personal representative, which means your executor. Once paid to the estate it is dealt with like any other estate asset and goes wherever your will directs, including into a testamentary trust.

Who can my super be paid to?

Super law limits who the trustee can pay. A death benefit can generally only go to:

• Spouse or de facto partner: including a same-sex partner.
• Children: of any age, including adult children, adopted children, stepchildren and a partner's children.
• Financial dependants: anyone who relied on you financially, wholly or partly.
• Interdependency relationships: a person you lived with in a close personal relationship where one or each of you provided the other with financial support, and one or each of you provided the other with domestic support and personal care.
• Your legal personal representative: your executor, to be distributed under your will.

Jane's super can go to John, Mia, Leo or her estate, but not straight to her sister. To benefit someone outside the list, nominate your estate and leave it to them in your will.

Binding, non-binding and non-lapsing nominations

A nomination is your written direction to the fund trustee about who should receive your super. The type you choose decides how much control you keep.

A binding nomination must meet strict formal rules. In a retail or industry fund that usually means the fund's form, signed and dated in front of 2 adult witnesses who are not nominated beneficiaries, and received by the fund. A missing witness, a wrong date or a beneficiary who is not a dependant can make it invalid, and the trustee then falls back on its discretion.

Has the 3-year lapse rule changed?

Not as at October 2026. A standard binding nomination made under the super regulations still lapses after 3 years (or a shorter period if the fund's rules say so) unless you confirm or renew it. What has grown is the alternative: a number of large funds now offer non-lapsing binding nominations made under their own rules with the trustee's consent. Each fund sets its own terms, so check your fund's form rather than assuming.

In March 2026 Treasury also released a consultation paper on options to stop a person who has committed family violence from receiving the victim's super death benefit. Any change depends on new legislation, so check the current position.

What is a reversionary pension?

If you are already drawing a pension from super, you can make it reversionary. On your death it simply keeps paying to the named person, usually your spouse, without the trustee having to make any decision. For a spouse it gives the strongest certainty. It counts towards the spouse's own super limits, so set it up with your adviser.

What is different in an SMSF?

In an SMSF the trust deed governs everything. The 3-year lapse rule that applies to retail and industry funds does not automatically apply to an SMSF, so a nomination can be non-lapsing if the deed allows it. The flip side is that the nomination must follow the deed's own requirements exactly. A nomination that does not comply with the deed may not bind the trustee, and that is where most SMSF disputes start.

Who controls the SMSF after a death?

The surviving trustees decide who is paid. Your executor can be appointed as trustee in your place from your death until the death benefit starts to be payable, but they are 1 voice among the trustees. A fund with individual trustees also has 6 months after a death to restructure, either by appointing a second individual or by converting to a company trustee.

This is where the Doe example matters. If John dies without a valid binding nomination, Jane is the surviving trustee of his SMSF. She could decide to pay all of John's benefit to herself, which could include the warehouse. Sam, John's son from his earlier relationship, would have no say. A binding nomination that complies with the deed takes that decision away from the surviving trustee.

What happens to SMSF property like the warehouse?

The fund can pay the death benefit in cash, which may mean selling the property, or it can transfer the property itself (in specie) to the beneficiary if the deed allows. Jane could take the warehouse leased to Doe Plumbing in specie rather than forcing a sale. Duty and capital gains tax need to be checked before the transfer, and if the property was bought with an SMSF loan, the lender's position too. See our SMSF property guide and SMSF services.

How is a super death benefit taxed?

Tax depends on whether the person who ultimately receives the benefit is a dependant for tax purposes. This is narrower than who super law lets the fund pay: an adult child is always a dependant under super law, but is only a tax dependant if they were financially dependent on you or in an interdependency relationship with you.

Rates as at October 2026, for lump sum death benefits. Life insurance paid through super often creates an untaxed element, which is why the higher rate catches many families. Jane's $850,000 (her balance plus life cover) paid to John is tax-free. The same amount paid to Mia, who is 19 and not financially dependent, could cost her a significant sum in tax. Where super is likely to end up with adult children, your accountant or adviser may suggest a strategy to increase the tax-free component.

Should super go to the estate or direct?

• Direct to a spouse: simplest and fastest. It is tax-free, needs no probate and is not held up by the estate.
• To the estate: slower, but it follows your will. That means it can flow into a testamentary trust, where income paid to minor children can be taxed at adult rates and the capital is protected. Where a share goes to a non-dependant, the estate pays the tax on it before it is distributed.
• Family provision: super paid to the estate is open to a family provision claim. In NSW, the court can sometimes reach super paid directly as well, so a direct nomination is not a guaranteed shield.

The Does' approach is a common one. Each nominates the other directly. On the second death, their nominations direct the super to their estate, so it funds the children's testamentary trusts under their wills. On Leo's share there is no tax if he is still under 18 at the time. On Mia's share the estate pays tax if she is not a tax dependant at the time.

Life cover inside super vs outside super

• Inside super: paid to the fund trustee and then out with your super balance, following your nomination. Jane's $500,000 cover follows her binding nomination to John.
• Outside super, with a nominated beneficiary: paid directly by the insurer to that person, without waiting for probate, and generally tax-free. It never reaches the estate, so it cannot go into a testamentary trust.
• Outside super, with no nominee: paid to the estate and passes under the will. The executor may need probate first.

Many people have default cover inside super without realising it, so we ask about the insurance in every fund as part of your estate plan.

Does divorce cancel a binding nomination?

Not automatically. Separation and divorce do not of themselves cancel a binding death benefit nomination, although some fund rules or SMSF deeds deal with this. A divorce order revokes gifts to a former spouse in a NSW will, but it has no effect on your super nomination. If you separate and leave the nomination in place, your super can still be paid to your former partner, or the nomination can fail and leave the decision with the trustee. Update your nomination as soon as you separate, together with your will and your enduring power of attorney.

What should I do now?

• Find your nominations: get a copy from each fund and check the date, the type and whether it lapses.
• SMSF members: have the trust deed reviewed alongside the nomination, and consider whether a company trustee suits the fund.
• Match it to your will: decide fund by fund whether super goes direct or to your estate.

We review nominations and SMSF deeds as part of every estate planning consultation, so your super, your will and your trusts work together. If you would like us to look at yours, get in touch.

This article is general information only, current as at October 2026, and is not legal, financial or tax advice. Estate planning, tax and Centrelink rules change over time and their effect depends on your circumstances. You should obtain advice specific to your situation before acting.