Superannuation: Your binding death benefit nomination

Ensure that after your death your superannuation is paid to who you want

What is a Binding Death Benefit Nomination?

A binding death benefit nomination is a direction you sign to the trustee that sets out the beneficiaries who you want to receive your superannuation benefits upon your death.

First, a story to tell. Paul and Greta were in their late 30s with 3 young children and had a lovely home on Sydney’s North Shore. Paul’s high income as an account executive for a large company adequately covered the substantial mortgage payments. Greta was a full time mother.

Tragedy struck when suddenly, Paul died of a brain haemorrhage. His superannuation amounted to around $500,000. Greta thought that as the sole beneficiary of Paul’s Will she would also receive all his super.

Imagine the shock when Greta was informed by the trustee of Paul’s super fund that as Paul had not signed a nomination, the superannuation benefit would not be paid to Greta but would be held in trust for the children. So far as the super was concerned, Paul’s Will, though valid, was irrelevant.

Faced with a huge mortgage to pay, Greta felt compelled to take legal proceedings against the trustee.

The Importance of a Binding Death Benefit Nomination

Unless your super fund is holding a valid nomination, when you die, the fund has discretion as to whom your super benefit is to be paid. As in the story above, the trustee’s decision may not always result in a distribution to who you expected.

By nominating who should receive your benefit, you will avoid the predicament that confronted Greta. A binding death benefit nomination removes the uncertainty about who receives your super and helps you manage your estate planning process more precisely and effectively.

By having a binding death benefit nomination in place, costly and time-consuming proceedings by dependants making competing claims on your super benefit, can be avoided.

Who can I nominate?

For a binding nomination to be valid the nominated beneficiary must be:

  • Your current spouse / partner
  • Your children of any age (including adopted / step children)
  • Anyone financially dependent on you
  • Any interdependent
  • Your executor / administrator – so that the entitlement is paid to your estate

How long does it last?

Typically a binding nomination is valid for three years *. Your super fund should advise you when your nomination is about to expire. You may cancel your nomination at any time.

How do I make a binding nomination?

Signature is similar to executing a Will. You need two witnesses who are not beneficiaries, aged 18 or over. The form must specify the nominated beneficiaries and their respective proportions for payment. Download the form from your fund’s website.

You need to ensure that you have considered the needs of all your dependents when it comes to distributing your assets.

Superannuation and my Will

Greta was unaware that Paul’s estate and his super would be treated differently. Unfortunately as Paul had not signed a nomination the trustee’s discretion was paramount.

In preparation for your conference with one of the Best Practice Lawyers regarding your estate planning arrangements do ensure that you have a current binding death benefit nomination.

Contact a Best Practice Lawyer today to seek assistance with your estate planning arrangements

* A super fund may have its own rules regarding the duration of the Nomination