Who gets your client's super when a stepchild is in the picture?

Two adult stepchildren attend the same funeral. Years later, one of them shares in the step-parent’s superannuation death benefit and the other receives nothing.

The fund’s paperwork explains none of it. What separates them is whether each kept a real relationship going after their own parent died.

This test now shapes how death benefits for blended families are decided.

Karen Robinson, senior estate planning lawyer at Equity Trustees, says decisions from the Australian Financial Complaints Authority and the courts have moved the legal ground under blended families.

Robinson adds advisers should treat the change as a planning issue rather than a legal curiosity. More than one million Australians belong to a stepfamily, according to the Uniting Families Report 2024.

The rule that quietly reversed

Superannuation death benefits often bypass the estate. Trustees pay them directly to a member’s dependants, and that group reaches well beyond people who relied on the member financially. Adult children and stepchildren both qualify.

The harder question has always been who still counts as a stepchild at the moment of death. Guidance the ATO issued in 2011 said a child ceases to be a stepchild when the relationship between their natural parent and the step-parent ends, either through divorce or through the death of the natural parent.

Read that way, a widowed stepparent’s stepchildren became former stepchildren overnight. Former stepchildren cannot receive a death benefit as stepchildren at all. Their only remaining path runs through financial dependency or an interdependency relationship. Both points are difficult to prove years after the fact.

Robinson says the accepted position has moved.

“The accepted view now is that the relationship between a stepchild and step-parent does not automatically end on the death of the natural parent.”

How AFCA decides death benefits for blended families

AFCA’s current approach to death benefit complaints recognises the relationship continues where two conditions hold.

First, the marriage or de facto relationship between the step-parent and the natural parent existed at the time the natural parent died. Second, a parental relationship between the step-parent and the stepchild has been maintained since.

That reasoning traces back to Bail v Scott-Mackenzie, where the Victorian Supreme Court held the step-relationship continues where the natural parent remained in the domestic partnership at the date of their death.

The second condition carries almost all the weight in practice. In a 2025 determination, AFCA accepted that four adult stepchildren remained stepchildren of the member even though their natural parent had died first and none of them depended on her financially.

The panel found the stepmother had dementia and still treated them as her stepchildren, so the relationship survived.

Christmas cards will not carry a claim

Advisers should expect the evidence question to arrive before the legal one. The courts and AFCA look past sporadic contact and ask whether a real relationship of affinity continued.

“While there is no bright-line test, occasional Christmas cards or infrequent phone calls alone are unlikely to be sufficient,” Robinson says. “Instead, the evidence should demonstrate a genuine, ongoing relationship in which the stepchild continues to be regarded and treated as part of the family.”

A November 2024 determination shows how sharply that cuts. AFCA upheld a trustee’s decision to split a death benefit between the member’s biological child and three stepchildren. One stepchild had kept an ongoing relationship of affinity with the deceased. Two others lost their share because no substantive relationship remained.

Proof rarely arrives in tidy form. Visits, phone calls and practical help with groceries or doctor’s appointments leave almost no paper trail. Records of family gatherings, letters and emails matter more than clients expect.

In that same 2024 matter, the stepchildren attended their step-parent’s funeral in person during COVID restrictions. The panel gave that weight.

Robinson notes that proving such a relationship “can be challenging, particularly where family relationships have deteriorated over time or disputes arise following the payment of a significant superannuation death benefit”.

The nomination clients forget to update

A binding death benefit nomination is the clearest way to manage death benefits for blended families, provided it still stands when the client dies.

Many lapse after three years. A nomination also loses its binding force when the named beneficiary dies first, which catches clients who nominated a spouse and then outlived them.

Once a nomination lapses, the trustee decides, and a widened pool of eligible stepchildren makes that decision far harder to predict.

“People often assume their superannuation death benefits will automatically be distributed under their Will, but this is often not the case,” Robinson says.

Certainty has limits worth naming. Each fund writes its own governing rules on eligible beneficiaries and on how nominations operate, so a structure that works inside one fund can fail inside another.

AFCA’s position also rests on determinations and published approach documents rather than legislation, and practitioners have not all accepted the reasoning: the Law Council of Australia and the Financial Services Council have questioned whether the interpretation lines up with state adoption laws, which means the ground can shift again.

The broader reading also cuts both ways. A client hoping to exclude an estranged stepchild now faces a claimant standing on firmer footing, while a client hoping to include one depends on a trustee reading the same evidence the same way.

Tax adds a further layer. An adult stepchild who qualifies as a dependant under superannuation law usually fails the separate tax test, because a death benefits dependant covers a child only while they are under 18, unless that person was financially dependent on the deceased or in an interdependency relationship.

The taxable component then loses 15 per cent on the taxed element and 30 per cent on any untaxed element.

The next review of a blended-family client’s file should start with a plain question. Who does the fund think this family is, and can anyone prove it?