Think you have your superannuation benefits all under control? It could be worth double-checking for safe measure.
Did you know?
Your super does not automatically form part of your estate in the event of your death.
Unfortunately, it is commonplace for people to assume their superannuation comprises part of your estate upon your death. This is not always the case. The people who receive the death benefit paid out by your super, depends on whether the member has listed a death benefit nomination or an automatic reversion nomination.
What is a binding death nomination?
A binding death nomination is a form that directs your super fund on how to pay your death benefit. These nominations are outlined in the Superannuation Industry Supervision Act 1993 (SIS Act). The nomination must be signed and dated in the presence of two witnesses who are over the age of 18 and who are not personally listed in the nomination. To remain binding, the nomination must be updated every three years.
Who can be nominated?
A nominated death beneficiary must be a legal dependent of the member or part of their legal team including:
- a spouse or de facto
- a child/ren
- financial dependent
- one who has an interdependency relationship with the deceased.
- a legal personal representative (estate)
What is an automatic reversion nomination?
This allows the member to direct the trustee on how to pay their death benefit without the need to renew every three years. Many super funds now offer this non-lapsing options to their members.
What happens at the member’s time of death?
In the event of a member’s death, the trustee will look into whether a binding or non-lapsing nomination exists. The option that is chosen and valid will need to be followed in the event of the member’s death.
The benefit of binding nominations
The main benefit of legally binding death nominations is the level of certainty you will have at the time of your death. You can be safe in the knowledge that the people you nominate will be the beneficiaries of your benefit. This is especially important if you have multiple potential beneficiaries who may make a stake on your benefit. Having a nominated beneficiary also means the benefit can be quickly paid out with ease as opposed to waiting for lengthy trustee processes.
A binding death benefit nomination can also be used strategically in a tax-effective manner, depending on how it is structured. Having a professional implement this for you correctly will ensure you minimise any negative effects on your beneficiaries. Dependent upon the beneficiaries’ tax position, they may be hit with a tax bill upon the event of the member’s death. It is important to ensure these factors are taken into account.
How to make a binding nomination
To make a binding death nomination with your super, the nomination must be made to the trustee in writing, signed by two independent witnesses and sent to the trustee.
If you need assistance with your superannuation planning, give our team a call to discuss your options and ensure your estate is looked after.
