Insurance within super
Who owns the insurance policy?
When a member decides to purchase an insurance policy inside super, the trustee is the policy owner and the member of the fund is the life insured. Therefore, the trustee of the superannuation fund takes on the responsibility of paying the premiums by deducting the payments from the member's account balance.
When a claim is to be paid out, e.g. term (death) cover or TPD, the proceeds are paid out to the superannuation fund being the policy owner. The proceeds are than added to the member's account and becomes part of the member's superannuation savings. Before the member can accessing the funds, the member must meet a condition of release and certain taxation applies under superannuation rules.
Superannuation fund trustee discretion
Many superannuation fund trustee retain absolute discretion over the direction of death benefit proceeds to dependants, or to the estate of the deceased member. In such circumstances, some superannuation funds will call for all potential beneficiaries to come forward and to express an interest in any potential benefit payment.
Trustee discretion may not provide members with a satisfactory level of certainty over the discretion of their superannuation proceeds following their death.
This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.
Last modified: Wednesday, August 25, 2021