Why Planning Your Super Matters More Than You Think
When it comes to planning for the future, many Aussies make the effort to draft wills and organise their assets. However, there’s one crucial piece of the puzzle that often gets overlooked: what happens to your superannuation when you pass away? Unlike most other assets, super isn’t automatically covered by your will. Next to the family home, superannuation is projected to be the second largest asset for many Australians. That’s why having a binding death benefit nomination in place is so important.
How Superannuation Differs from Other Assets
Superannuation holds a unique position in the eyes of the law. It isn’t considered part of your estate in the traditional sense. Instead, your super fund trustee decides who receives your super (including any life insurance payout held inside your super) when you die, unless you have a valid and current binding death benefit nomination in place. This is very different from assets like your house, car, or bank accounts, which are typically distributed according to your will.
What Is a Binding Death Benefit Nomination?
A binding death benefit nomination is a legal document you give to your super fund that tells the trustee precisely who you want to receive your super benefits when you die. Provided it’s valid and up to date, the trustee is legally bound to follow your instructions without using their own discretion. This is determined by the Superannuation Industry (Supervision) Act 1993 Cth which sets out how superannuation is distributed in the event that someone passes away.
Why It’s So Important
- Certainty for Loved Ones: A binding nomination takes the guesswork out for your super fund and gives your nominated beneficiaries peace of mind.
- Avoids Disputes: Without a binding nomination, disputes can arise among family members or dependants, potentially leading to drawn-out legal battles.
- Greater Control: You specify who receives your super, rather than leaving it up to the trustee’s judgement or eligible dependants alone.
- Speedier Process: Binding nominations can help streamline the distribution process, meaning your loved ones may receive funds faster at a difficult time.
- Legally Bound: Binding death benefit nominations require the superannuation member to have two independent witnesses there when the document is signed. This serves as a check to prevent signing under duress and allows witnesses to be consulted if a superannuation payout is disputed.
Who Can You Nominate?
You can only nominate individuals who are considered your dependants under superannuation law. This usually means your spouse or de facto partner, your children, anyone financially dependent on you, or your estate/legal personal representative (the executor of your will). For example, if you wish to distribute your superannuation to friends or siblings, you will need to nominate your estate/legal personal representative and ensure that you have established a will that nominates these individuals to be the recipient of your superannuation.
Keeping It Up to Date
Binding nominations generally need to be renewed every three years, or they may lapse and become non-binding. More superannuation funds are coming out with binding non-lapsing nominations, which means that they do not need to be renewed every three years. However, it is important to check with your superannuation fund about what their death benefit nomination rules are. Major changes in your personal life, such as marriage, divorce, or the birth of a child, should always prompt a review of your nomination.
Super Planning? It’s Super Important
While it might seem like just another bit of paperwork, a binding death benefit nomination is a powerful tool for ensuring your superannuation ends up in the right hands. By taking the time to put one in place, you can provide certainty and comfort for your loved ones and make sure your wishes are respected.
Book a chat with our team and we’ll help you understand your options.
