Superannuation and binding death benefit nominatons 

Have you made a valid binding death benefit nomination? 

If your superannuation is managed by an industry or retail super fund, such as Aware Super, Australian Super, Hostplus, Mercer to name a few, you might remember making a nomination as to who receives the balance of your superfund upon your death. You might have an app on your phone which allows you to see your details, the balance of your fund, how your funds are invested, and select who receives your super when you die. It is a good idea to double check whether the nomination you may have made, is actually binding. A binding nomination requires a wet-ink signature and two witness signatures. If you are not sure, it is best to contact your superfund to check what nomination you have in place, and whether it is in fact binding. Binding nominations usually lapse every 3 years, therefore, you will have to remember to renew your nomination. You can also make a non-binding nomination which does not normally lapse, but it is not binding – which means the superfund still has discretion as to who to pay your superannuation benefit to.

When making an estate plan and a Will, it is important to understand that you can only give away assets in your Will that you legally own. Your superannuation is not an asset that you legally own, the funds are held on trust. The trustee of your superannuation fund is the legal owner of the asset, and you are the beneficial owner. Therefore, as a starting point, your superannuation balance does not automatically pass through your Will.

Which rules govern my agreement with the superfund?

The agreement that you have with the superfund, is governed by the trust deed of the superfund itself. The trust deed is then supplemented by the legislation governing superfunds (Superannuation Industry (Supervision) Act 1916 (Cth) and the Superannuation Industry (Supervision) Regulations 1994 (Cth). These contain the rules around making death benefit nominations and how the trustee will determine who should receive the funds if you have not made a binding nomination.

What if I die and I have not made a binding nomination?

If you have not made a binding nomination, the trustee will have discretion as to who they think should receive the funds upon your death. Even if you are married with kids, the trustee of the superfund will still make its own determination as to who should receive the benefit and in what proportion. Usually there are administrative costs associated with this process. Your loved ones will have to provide documentation, and they may experience a delay in receiving the funds.

Essentially, the binding death benefit nomination is a Will for your super and takes away the discretion of the trustee.

Who can I nominate?

You can nominate a spouse, dependents such as children, or your legal personal representative (your estate). The legal personal representative is your executor if you have a Will, or the administrator of your estate if you die without a Will. When filling out the binding death benefit nomination form – don’t make the mistake of putting your estate planning solicitor’s name here!

Selecting this option means that your superannuation proceeds will be sent into your Will and form part of your estate assets, which will be distributed according to the provisions of your Will. A grant of probate/letters of administration will need to be obtained before the funds are released.

If you nominate your spouse, children or other dependants directly, they will receive the funds directly without having to obtain a grant of probate first. They can deal with the superfund directly in order to receive the funds.

If you nominate your minor children directly, it is important to understand that the funds can then be released to their legal guardian upon your death. For separated parents, this might not be ideal.

Making sure your binding death benefit nomination is valid

You can’t nominate someone who is not a dependant, such as a friend or uncle. If you want your superannuation to go to someone who is not a dependant, then you should nominate your legal personal representative so that you can then make provision for this person in your Will. You can also break it up in percentages, for example, 50% to your spouse and 50% to your legal personal representative.

Often you can google “binding death benefit nomination form”  and then the name of your superfund, to find the applicable form. You then print it, complete it, have it witnessed by two people and send it back to the fund.

Lastly, make sure that your superfund confirms receipt and acceptance of your nomination form. Make sure you read the instructions for completion, as some funds will not accept it if there are any mistakes on the form.

It is important to look at your binding death benefit nomination in conjunction with your estate plan overall, and to see an estate planning lawyer to give you advice based on your specific circumstances.

To discuss your estate planning needs with one of our Team, contact Solari and Stock on 8525 2700, or click here to request an appointment with one of our experienced Estate Planning Team today. Our Estates Team includes Michael Solari, Rebecca Exley, Valentina Abouzeid and Nicole Commandeur.

Article by Nicole Commandeur
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