Superannuation Death Benefit Nominations: Why They are Important.

What is a death benefit nomination and why is it important?

Thinking about what happens when you die is usually the last thing on people’s minds, but preparing in advance can really save your loved ones some additional grief. By making certain preparations, you can assure that your family will be well-taken care of and that no legal issues would surround the distribution of your assets.

The most basic preparation to take would be the preparation of your will, particularly noting who your beneficiaries are and what they should get.

However, one question we are often asked is whether superannuation forms part of your estate that can pass under your will. The answer is no.

This is why in our view, it is crucial that you also prepare a binding death benefit nomination for your superannuation so that you direct who receives the benefit of the savings you have made over your working life in your super.

Superannuation Death Benefit Nominations

Superannuation is the compulsory amount paid on top of your regular salary to be put away for your use when you retire. The entire goal is to be able to save enough money for use when you no longer have work—except for certain circumstances, such as when you pass away.

The superannuation death benefit nomination dictates to whom your super will go to. This beneficiary, unfortunately, can’t be stipulated within your Will—as it only covers assets that you actually own on-hand. Your super, on the other hand, is held within a trust and handled and invested by a super fund trustee on your behalf. Their actions are consequently governed by the terms of the superannuation fund itself, which unfortunately can’t be interfered with by your Will.

What happens when the death benefit nomination starts to operate?

In the event of your passing, the first thing that will occur is a review of your superannuation’s beneficiaries. It will indicate one of two things, whether it is left with a binding nomination or a non-binding nomination.

Binding nominations are straightforward, with the addition of some extra effort, you can securely name who will be the one to receive your super. To do so, a form will need to be signed, usually in front of two witnesses. Take note, however, that this expires in three years—so be sure to review this document regularly and be sure that who you nominate each three years is who you want to benefit upon your passing.

In the unfortunate event that you pass without setting a binding nomination or if it has expired, then it defaults to a non-binding nomination. This type is usually more common, as it’s easier to set—it can sometimes be done online or over the phone.

What can happen, however, is that upon your death, it could fall to your trustee to determine who your super will be paid to.

While they may take into account the contents of your will, they are ultimately not bound by it, thus still preferring to award your super at their own discretion in accordance with what their super fund rules provide. To make matters worse, the trustee’s decision may be able to be challenged by other potential beneficiaries, making the payment period drag on for a prolonged period of time due to legal squabbles.

Who can I name as my beneficiaries?

Take note, however, that just because you name a person it doesn’t mean they will receive the benefit. The superannuation death benefit guidelines can be quite specific as to who can be named as a beneficiary, so if the criteria do not apply, then your death benefit defaults into a non-binding nomination.

For one to be named as a beneficiary, they usually must be at least one of the following:

• Your spouse
• Your children (regardless of age)
• Someone financially dependent on you
• Someone in an interdependent relationship with you
• your estate or a legal personal representative

Conclusion

Preparing for your passing can be a bit of a morbid topic, but doing so will leave those you love with the clearest instruction regarding what you want to happen when you pass away. By setting clear guidelines, you can avoid the unnecessary legal squabbles that can potentially destroy your family.

For the best results in your wills and estate planning, the advice of a leading estate lawyer in Canberra, ACT, can prove to be beneficial. Get in touch with us today and let us know what services we offer will fit best for you.