Death Benefit nomination for super

Q: My wife and I are reviewing our Estate planning. Why do we also need a Death Benefit nomination for our Super funds? Shouldn’t our Wills cover our instructions on death for joint assets and our Superannuation funds?

A: Your Will is a legal document that sets out your wishes for the distribution of your estate assets on your death. Assets owned jointly as “joint tenants” are not covered by your Will as ownership will revert to the surviving owner on your death. Assets held in trust on your behalf are generally not dealt with under your Will, but are governed by the terms of the applicable Trust Deed.

Superannuation is an example of an asset held in trust on your behalf. As the Trustee owns the assets on your behalf, the legal mechanism to instruct the Trustee on how to distribute the proceeds of your Superannuation on your death is a “Death Benefit Nomination”.

A Superannuation lump sum death benefit can only be paid to an eligible beneficiary or be specified to be paid to your “Estate” as the Death Benefit Nomination.

An eligible beneficiary must be a spouse, your child, an individual financially dependent upon you, or an individual you have an interdependency relationship with.

An interdependency relationship is defined as a close personal relationship, where you live together, one or each of you provide financial support and domestic support and personal care.

Broadly, there are two types of Death Benefit Nominations; Binding and Non-Binding. A Non-Binding Death Benefit Nomination is not binding on the Trustee of the Superannuation fund to pay out the funds to your specified beneficiary. In some circumstances a Superannuation Trustee may allocate a portion of your Superannuation benefit to an individual regardless of your nomination, provided they meet the definition of a beneficiary.

A valid Binding Nomination compels the Trustee to pay the death benefit to the nominated beneficiary provided they are an eligible beneficiary at the time of your death.

A Binding Death Benefit Nominations ensures that the proceeds are paid out to the surviving spouse without the risk of the Trustee executing discretion to provide a benefit to other potential claimants. A disgruntled claimant has no right of recourse against the Trustee in disputing your Binding Death Benefit Nomination.

A Binding nomination will expedite the settlement of an estate. As the claim does not form part of your Estate, (unless the Estate was specified as the Death benefit Nomination) the death benefit would not be tied up with the conventional process of settling the Estate, and the delays associated with a Grant of Probate.

Making a Death Benefit Nomination is as critical as ensuring you have a valid Will. With Life Insurance and retirement savings typically being held within Superannuation, the vast majority of your net worth and who receives the benefit may be determined by your Superannuation Death Benefit Nomination. So make sure your Death Benefit Nomination is up to date and valid.

Share this post