What happens to your super when you pass away?
Written by Glen James
Host of the Retire Right & money money money (formerly my millennial money) podcasts & author of The Quick-Start Guide to Investing.
A question popped up recently in the money money money Facebook group that is relevant to anyone, but especially for anyone who wants to make life easier for their loved ones when they're gone.
‘When you pass away, does your superannuation stay invested or does it freeze until it's paid out? And how long does it take for super to be released?’
❗First: super isn’t part of your estate
A lot of people assume that their super and life insurance automatically get paid out in accordance with their will. Wrong. Your super is held in a trust. That means it’s managed separately from your estate by a trustee (your super fund). If you want control over where that money goes when you die, you need to nominate a beneficiary by setting up a binding nomination.
✅ How binding nomination works
A binding nomination tells your trustee exactly who gets what. No ambiguity, no delay. If you've got a spouse or kids, this is usually pretty straightforward. If you don’t have a valid nomination? The fund trustee uses their discretion, and that may not be ideal. I’ve personally helped families who had to wait six months or more for a death benefit to be paid out. One case even required statutory declarations from adult kids just to approve the payout to mum. If your super fund doesn't have clear instructions, they’ll be cautious and gather every bit of information possible, and that takes time. You can however nominate your estate as a beneficiary (that means it will be distributed as per your will).
📉 Does the money stay invested?
Usually, yes. Most super funds will keep your money invested until the day it’s paid out. So, if the markets are up, great, your balance might grow a little. But if they’re down? Tough luck. Some funds might shift the balance to cash once they’re notified of a death, but it varies. Best thing to do is call your super fund and ask what their process is.
📜Understand the implications of choosing beneficiaries
One heartbreaking case I saw involved a young dad who left 100% of his super to his two kids under 8. It sounds noble, but it made a huge mess. His wife was left with a mortgage and couldn’t access the super because the money legally belonged to the children. She may have been able to use some of this money to clear the mortgage etc as it was for the kids benefits, but just messy. Please don’t put your loved ones in that position. If you want the money to help your kids, think through who will have the legal right to the funds and how it will flow on from there.
The takeaway:
Have a valid binding nomination on your super
Review your binding nomination regularly, especially after life changes like divorce, death, or kids turning 18 (tax treatment changes once over 18)
Call your fund and ask what their process is when a member dies
Make sure your will and super work together, to ensure all of your wishes can be met.
If in doubt seek your own legal advice, particularly if you have a blended family.
It's not fun stuff to talk about, I know. But a bit of paperwork now can save your family a whole world of drama later.
Community question
Community member says: I’m a 50-year-old woman and recently inherited my late father’s house, which I’ve since renovated. It could sell for around $800K, and I’d love to buy a modest one-bedroom apartment outright and avoid the hassle of tenants or another mortgage. Two people told me to keep the house for rental income or capital growth. I respect their advice, but I’m not sure their goals align with mine. I value a low-stress, low-maintenance lifestyle. Has anyone been in a similar situation or received advice on weighing lifestyle versus financial return?
Glen says: This is such a good question, and a really common situation as elderly parents pass away. First of all, I’m sorry for your loss, and well done for putting in the work to make the property liveable again.
Let’s take a step back and remember: not all financial decisions need to be made through a purely financial lens. If your heart says, ‘I want simplicity and freedom,’ then lead with that. It’s absolutely okay to sell an inherited property and buy something smaller outright. If that gives you peace of mind and lets you avoid a mortgage or dealing with tenants, that’s not a financial mistake, it’s a lifestyle win.
The house might go up in value, sure. But you’re not doing anything “wrong” by choosing to live well now. You could even use some of the remaining cash to top up your super and set yourself up for the future.
So to answer your question, yes, plenty of people choose lifestyle over maximum return. It’s your life, and your money should serve it, not the other way around.
John and I discussed this situation in quite some detail if you’re keen to hear how we approached it. Watch our discussion of it here: