“Often a member of a super fund will want to provide for their spouse; and if the spouse should predecease them, to their children; and if one of their children predeceases them, to the issue of the deceased child — that is, their grandchildren,” SuperCentral said.

“For a gift under a binding death benefit nomination to be valid, the recipient must be an eligible beneficiary of the member making the nomination at the date of death of the member. The eligible beneficiaries are the legal personal representative of the estate of the deceased member, the member’s spouse, the member’s children, anyone who was financially dependent on the member and any person who was in an interdependency relationship with the member.”

The law firm gave the example of Xander, who wants to leave his death benefit firstly to his wife Xanthe, then to his children Hector and Lysander if Xanthe dies before him, and if either Hector or Lysander dies before him, their shares should be paid to their children (Xander’s grandchildren), Bert and Elmo.

“The contingent gift to Bert and Elmo will generally not be valid. They are not the children of Xander but his grandchildren,” SuperCentral said. 

“The gift to Bert and Elmo will only be valid if they are financial dependents of Xander — grandchildren are not automatically financial dependents of a grandparent — or in an interdependency relationship with Xander at the time of his death, which would be an extraordinary position.”

If wording of the death benefit nomination was left in this way and both Hector and Xanthe died before Xander, the law firm said, the share of the benefit payable to Hector would fail and would either be given to his brother Lysander or given as a residual gift to Xander’s estate.

“If Xander wanted the portion of the death benefit which was to go to Hector to be allocated to Hector’s issue, then there should have been a fourth contingent gift in the nomination to the effect that ‘should either or both Hector or Lysander predecease me, the portion which, but for their death, would have been paid to them must be paid to my legal personal representative’,” SuperCentral said.

“Xander should then have included special provision in his will to the effect that any super benefit which would have been paid to Lysander or Hector but for their death must be applied for the issue of the deceased child, and if there is no issue, to be included in the residuary portion of the estate.”