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Superannuation – Binding Death Nominations – Do we need them?

Superannuation – Binding Death Nominations – Do we need them?

A recent article in the media highlighted the importance of having nominations in place should you pass away unexpectedly. Contrary to popular belief, your superannuation and any life insurance connected to your super does not form part of your Will.

If you want control over who your hard earned superannuation goes to, then it is important to consider a Superannuation Death Benefit Nomination.

A Superannuation Death Benefit Nomination is a document submitted to your superannuation (or pension) fund directing them how to pay your superannuation if you pass away. One thing that many people may not be aware of is that your superannuation can only be paid to people that are defined as dependants under the superannuation legislation.

A dependant for superannuation purposes includes;

  • Your spouse or de facto spouse
  • Your child of any age
  • A person who has an interdependent relationship with you at the time of your death.

An interdependant relationship is defined as a close personal relationship between two people who live together, where one or both of you provide financial, domestic or personal support to the other.

The definition of dependant excludes;

  • Parents
  • Siblings
  • Other relationships, for example, friends

If you wish your superannuation balance to be left to parents and/or siblings or other person, or you do not have any superannuation dependants, you will need to nominate for your superannuation (and any associated life insurance balance) to be paid to your Legal Personal Representative/ Estate. This way your superannuation forms part of your Estate and is distributed according to the instructions contained in your Will.

Types of Superannuation Death Benefit Nominations

  • Binding Death Benefit Nomination
  • Non-Binding Death Benefit Nomination
  • Non-Lapsing Binding Death Benefit Nomination
  • Reversionary Pension

Binding Death Benefit Nomination – gives certainty as to who will receive your superannuation and the trustee of your fund is bound to distribute to the beneficiaries you have nominated. That being said, the Binding Death Benefit Nomination expires after three years so you will need to ensure that it is reviewed & renewed every three years.

Non-Binding Death Benefit Nomination – is a nomination made to your super fund that is not binding on the trustee. This means that the trustee will consider your beneficiary nominations, but will retain ultimate discretion as to which of your dependants will receive your super in the event of your death.

Non-Lapsing Binding Death Benefit Nomination – is the same as a Binding Death Benefit Nomination, but it does not expire. That is, the 3-year validity of the nomination does not apply to Non-Lapsing Nominations. Therefore you need to act upon any changes in relationships (due to breakdown etc )that may alter your intention to distribute to certain individuals.

Reversionary Pension – this is an effective tool which allows the payment of your retirement income stream to your nominated reversionary beneficiary after your death (ie. A dependant). This means that you don’t need a Death Benefit Nomination in place and the superannuation retirement income stream can be paid without being included in your Estate.


What if You Die without a Super Death Benefit Nomination in Place?

If you die without providing your superannuation fund with any type of death benefit nomination or reversionary pension, the trustee of your superannuation fund will assess potential beneficiaries based on relationships and eligible superannuation dependants and determine who receives your superannuation in the event of your death.


What to do next

Contact your superannuation fund and find out;

  • Are there any Death Benefit Nominations in place?
  • Who are the nominated beneficiaries?
  • If there is a Death Benefit Nomination in place, what type is it? Binding / Non Binding / Non Lapsing
  • If you are receiving a retirement superannuation income stream (pension),  check to see if its reversionary.