Masterclass – SMSF – Part 1: What If There Are No Dependants When a Member Dies?

Masterclass – SMSF – What If There Are No Dependants When a Member Dies?

SMSF – What If There Are No Dependants When a Member Dies?

If a member has no surviving spouse (or de facto) or children when they die, there may be other people who were dependant on the member – this is defined in section 10 of the Superannuation Industry Supervision Act 1993 (SISA), as any person with whom you have an ‘interdependency relationship’.

Section 10A of SISA also explains that an interdependency relationship between two people is where:

(a) They have a close personal relationship; and
(b) They live together; and
(c) One or each of them provides the other with financial support; and
(d) One or each of them provides the other with domestic support and personal care.

Subsection 10A(2), further explains that if two people satisfy the requirement of (a), but they do not satisfy the other requirements because either or both of them have a physical, intellectual or psychiatric disability, then they are still classified as having an interdependency relationship.

The SIS definition of a dependant is inclusive and as such under the common law principles, includes any other person who was a financial dependant of the member (ie. relied on the member for financial maintenance) just before he/she died.

Therefore, unless relatives or co-habitants in the same household, or nieces and nephews satisfy the above at the time of death, they would NOT be classified as SIS dependants under section 10 of SISA, and NOT be able to receive a payout of death benefits.

When a member of a SMSF dies, SIS Reg 6.21(1) directs that the member’s benefits must be ‘cashed’ as soon as practicable. The money is then paid by either a lump sum payout to dependants or to the estate, or an income stream commenced to a dependant (note that a child must be less than 18, or be between 18 and 25 and be financially dependent, or have a severe disability at the time of death for the benefit to be paid as an income stream).

Where there are no remaining dependants then there is very little choice. The member’s legal personal representative (‘LPR’) will become the trustee of the SMSF (an automatic appointment under well-written Trust Deeds such as what SuperBenefit provides), assets will be realised and paid out to the estate and then paid out according to the will (i.e. to nieces and nephews).

The only time that a superannuation fund could pay directly out to non SISA dependants is when after reasonable inquiry the remaining trustees could not find a LPR or any dependants.

Interested to know what self-managed super (SMSF) is all about, how to get set up FREE and if it is for you?

We have FREE seminars and bonuses every month – Self Managed Super Fund Roadmap (all you need to know) see 1 SMSF – FREE Seminars


About SuperBenefitnews

Self-Managed Superannuation Service Providers in Australia. SuperBenefit provides a wholistic SMSF assistance, education and administration service continuum - 1. “assistance” is help of whatsoever nature where our overall SMSF experience and knowledge enables us to provide assistance/help without any legal (or “license”) limitations. 2. “education” involves providing knowledge through teaching, coaching and mentoring about all matters SMSF, including (but not limited to) investment issues such as equities and property, 3. “administration” encompasses all admin aspects of legally required SMSF trustee and member record keeping including (but not limited to) audit and ATO matters. In keeping with our key point that SuperBenefit does not provide Financial Advice, where issues arise from 1, 2, and/or 3 above Indicate a need for a legally authorized provider (such as a Financial Adviser) and the client does not have their own service provider, the client can utilize SuperBenefit’s ‘Connect Assist’ … SuperBenefit, in itself, does not provide Financial Advice, but it does provide the wherewithal for great SMSF service. WE do not provide Financial Advice or any other service that requires a legally authorized provider. However, where such advice or service is required we have our ‘Connect Assist’, a SuperBenefit resource we use to connect clients to a Licensed Advisor or other legally authorised service provider. Call us 0407 361 596, no obligation FREE Connection call to see how we can help you!
This entry was posted in 2 Past Newsletter Topics, Masterclass SMSF, Super Law & Compliance and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s