When a loved one dies, it’s common for family members to consider the resources and funds that may be available to help pay for the funeral. One such consideration is superannuation. In certain circumstances, it may be possible to access either the deceased’s or your superannuation fund to assist in covering funeral costs.
This article explores the idea of using superannuation to pay for a funeral. We look at:
- What is superannuation?
- Early access to your superannuation to pay for a funeral
- Accessing the deceased’s superannuation: death benefit payments
1. What is superannuation?
Superannuation is money set aside over a person’s lifetime to provide for their retirement. Generally, superannuation can only be accessed once a person reaches a certain age and/or retires.
Superannuation arises in the context of funeral payments for 2 reasons:
- In certain cases, a person may be granted early access to their superannuation fund to pay for a family member’s funeral.
- In other cases, a death benefit payment may be available from the deceased’s superannuation fund. The deceased’s family members may be able to put this payment towards the cost of the funeral.
Superannuation is held for a super fund member in a trust by the trustee of the super fund. It is governed by superannuation law. It is important to note that, unlike the rest of the deceased’s money and assets, superannuation is not automatically included in the deceased’s estate.
2. Early access to your superannuation to pay for a funeral
Generally, it is not possible to access the money in your superannuation fund until you have reached your preservation age (i.e. around retirement age). This is because the purpose of superannuation is to provide for your retirement.
However, there are limited circumstances in which you may be granted access to your superannuation fund at an earlier date.
Who is eligible to access superannuation on compassionate grounds?
You may be permitted to withdraw some of the money in your superannuation fund on compassionate grounds.
To do so, you must:
- be an Australian or New Zealand citizen or permanent resident;
- need the money on compassionate grounds;
- have no other way to pay, such as using savings or selling assets.
It is not possible to be granted early access to superannuation in an exempt public sector super scheme.
What are compassionate grounds?
Compassionate grounds include paying for expenses associated with the death, funeral or burial of a partner, child or other dependant.
It is only permitted to withdraw an amount that covers reasonable costs such as the funeral service and headstone.
Importantly, super will only be released early to meet unpaid costs. It is not possible to access your super to pay for expenses that have already been paid, whether by loan, credit card, or other means.
How do I apply for early access?
You will need to apply to the Department of Human Services for early access to your super.
Will this impact me financially?
It is possible that accessing your superannuation early will affect other payments you receive, such as child support and/or Centrelink. You may also be required to pay a fee to your super fund and/or tax on the money you receive. You should seek financial advice before applying to access your super.
3. Accessing the deceased’s superannuation: death benefit payments
When a person passes away before they retire (and therefore before they have accessed their superannuation), a death benefit payment is made from that person’s superannuation fund to eligible beneficiaries, or to the fund member’s estate.
A death benefit payment consists of:
- the account balance of the deceased member’s superannuation; and
- any insurance amount which is payable (and which depends on the member’s level of insurance coverage with the superannuation fund, as well as their age when they passed away).
Who can claim a death benefit payment?
A superannuation death benefit payment can be paid to the fund member’s dependants, or to the deceased’s estate or legal representative (in which case the superannuation can be distributed by the terms of the deceased’s will).
A dependant generally means:
- the member’s spouse (including a de facto, ex-spouse or same-sex partner);
- the member’s child;
- a person who was financially dependent on the member at the time of their death; or
- a person who had an interdependent relationship with the member at the time of their death.
Nominated beneficiaries
A super fund member can nominate a beneficiary; that is, to specify a non-binding preference that a particular person receives an amount payable when the member passes away. While the trustee will consider the entitlement of nominated beneficiaries, their decision must be based on the question of who is entitled to receive a death benefit payment by governing law. Accordingly, a nominated beneficiary may not receive a death benefit payment.
Binding nomination
it is also possible for a super fund member to make a binding nomination for their superannuation to be paid to one or more dependants or their legal personal representative. The trustee must pay the individuals nominated, provided they qualify as legal dependants or the member’s legal personal representative.
How is a death benefit claimed?
Where a claimant notifies a superannuation fund of a fund member’s death, the fund will send certain documents and information to the claimant, including an estimate of the deceased’s account balance and whether the deceased held insurance cover with the superannuation fund. The superannuation fund will request additional documents providing proof of the member’s death.
The trustee of the super fund will then consider who should receive the death benefit. This involves identifying potential dependants of the deceased, and whether those dependants meet the criteria of a dependant as listed above.
The trustee will then inform claimants as to the persons to who the trustee proposes to pay the benefit to, and the proposed division of the benefit.
Claimants then have 28 days to confirm acceptance of the trustee’s proposal, or to request a review of the proposal. Claimants may be asked for additional information for the review.
How is a death benefit paid?
Once all issues are resolved, the death benefit payment will be paid to the relevant recipients.
Death benefit payments may be taxable. Taxation of a death benefit payment will depend on factors such as the recipient of the payment, the superannuation components, and how the benefit is paid. You should consult your tax advisor for more information.
How long does it take to receive a death benefit payment?
Although super funds are required to make death benefit payments as soon as possible after a member’s death, as described above, the process of claiming a payment and then assessing that claim can take some time. Family members may need to pay for a funeral before being able to access money from a super fund.
eziFunerals offers a solution to this issue with our buy now pay later option. Through our partnership with xxxxx, you can purchase a funeral from selected funeral directors and pay nothing up front, with 3 months to pay off the loan, interest and fee-free. This option can help relieve financial pressure while you wait to receive the death benefit payment.
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About eziFunerals
eziFunerals supports individuals and families cope with end-of-life decisions, death and funerals. We are an independent, Australian-owned and operated company. We are not part of any other funeral company.
Our member Funeral Directors operate in Sydney, Melbourne, Brisbane, Perth, Adelaide and Australia-wide. Thet are chosen for their knowledge, quality, service, personalisation and experience. They go above and beyond, and will take the time to support the family.
For more information or to make contact with a trusted Independent funeral director, call eziFunerals on 1300 236 402 or visit www.ezifunerals.com.au.
Peter Erceg
Peter Erceg is the Owner and Founder of eziFunerals. He has had a long history within the funeral industry, and is a published author of ‘What Kind Of Funeral: A self help guide to planning a meaningful funeral’. Prior to eziFunerals, Peter worked in the public sector and health industry for more than 30 years. The views and opinions expressed on posts are those of the author and do not necessarily reflect the opinions of eziFunerals and members.
