Understanding How Superannuation Death Benefits Are Distributed by Trustees
Published on February 20, 2026 by David Coorey
When a loved one passes away, one of the most important financial matters for their family is often the distribution of superannuation death benefits. While some beneficiaries may assume that superannuation funds are simply paid according to a nomination or the terms of the policy, the reality is that trustees have discretion in how these benefits are distributed where there is no binding nomination. Understanding how trustee discretion works, and what factors are considered, can help potential beneficiaries navigate the claims process more effectively and reduce the risk of disputes.
It is well-established law that a trustee must act in the best interests of the beneficiaries. Trustees are expected to make decisions with the same skill and care as a reasonably prudent person, with a higher standard applied to professional trustees.
What is the trustee role?
In article 5 we examine the key distinction in the Trustee’s role between binding and non-binding nominations.
The trustee’s role where there is no binding nomination in a death benefit distribution is typically to identify eligible recipients and then exercise discretion in the best interests of all eligible beneficiaries.
This discretion ensures that superannuation death benefits are distributed fairly and equitably. Trustees are legally bound to act in good faith, taking into account the interests of all dependents and beneficiaries, not just those who make the loudest claim.
When is trustee discretion used?
Trustee discretion is commonly applied in the following situations:
- No binding nomination exists – if the deceased did not make a binding nomination, the trustee must decide who receives the benefit.
- Multiple eligible beneficiaries – where there are several dependents or family members, the trustee must allocate the benefit in a fair and equitable manner
- Uncertainty about dependence or relationship – trustees assess claims from adult children, stepchildren, or other financial dependents and determine eligibility based on the evidence provided.
Recognising when discretion applies can help beneficiaries understand why additional evidence and documentation may be requested.
Factors trustees consider
When exercising discretion, trustees evaluate several key factors as prescribed by the Superannuation Industry (Supervision) Act 1993 (Cth). (link to Act https://www.legislation.gov.au/C2004A04633/latest/versions ) and its Trustee’s governing rules on assessment and distribution of death benefits. A trustee will consider the relationship between each claimant and the deceased, including spouses, de facto partners, children, and other dependents, assessing the closeness and nature of these relationships. Trustees also examine financial dependence or inter-dependence, including determining whether the claimant relied on the deceased for living expenses, education, or other essential needs. Non-financial contributions, such as caring for the deceased or supporting the family, may also be taken into account. Finally, trustees aim to allocate the death benefit in a way that is fair and reasonable to all potential beneficiaries, consistent with their duty to act in the best interests of all claimants.
How trustee decisions are made
When exercising discretion, trustees follow a formal process that aligns with their legal duties. They begin by reviewing the deceased’s nominations and any relevant documentation. Trustees then assess evidence regarding relationships, financial dependence, and contributions to the family to determine each claimant’s eligibility. Where necessary, they may consult with potential beneficiaries to better understand competing claims. Ultimately, the trustee makes a decision that is fair, reasonable, and consistent with the fund’s governing rules. It is important to note that trustees are not required to follow the wishes of individual beneficiaries if doing so would conflict with their duty to act in the best interests of all potential claimants.
Tips for beneficiaries
To strengthen a claim under trustee discretion, beneficiaries should provide clear evidence of their relationship with the deceased, financial dependence, and contributions to the household or family. Submitting supporting information early helps the trustee make a timely and informed decision. Beneficiaries should also respond promptly to trustee requests and be aware of deadlines for notices, Internal Dispute Resolution (IDR) complaints, and Australian Financial Complaints Authority (AFCA) escalation. Clear and respectful communication can prevent misunderstandings and disputes among multiple claimants.
Even when trustees act correctly however, disagreements may arise. If you disagree with a trustee’s decision you can take these steps:
- Internal Dispute Resolution (IDR) – For death benefit distribution complaints, parties have 28 days to object to a final decision. If an objection is received, the Trustee has 90 days to reach a final resolution.
- Australian Financial Complaints Authority (AFCA) – A death‑benefit distribution complaint which seeks a review of the Trustee’s final IDR decision must be lodged within 28 days after the complainant is given written notice of the trustee’s final decision
Seek legal advice – a lawyer specialising in superannuation law can assess the decision, gather evidence, and represent your interests as required.
Ultimately, acting promptly and following formal procedures is essential to protect your rights. Strict time limits apply so act without delay.
Trustee discretion exists to ensure superannuation death benefits are distributed fairly and in the best interests of all beneficiaries. Understanding how trustees make decisions, what factors they consider, and how to provide supporting evidence can improve your chances of a favourable outcome. Maintaining organised documentation, acting within deadlines, and seeking professional guidance when necessary are key strategies for navigating the process successfully.
This article was published on 20 February, 2026 by Carroll & O’Dea Lawyers and is based on the relevant state of the law (legislation, regulations and case law) at that date for the jurisdiction in which it is published. Please note this article does not constitute legal advice. If you ever need legal advice or want to discuss a legal problem, please contact us to see if we can help. You can reach us on 1800 059 278 or via the Contact us page on our website. (www.codea.com.au). If you or a loved one has been injured, use our Personal injury Claim Check now.
