Superannuation…who gets it when you die?
When you die the Trustee of your super fund decides on the dependants who receive your super. Many people are blissfully unaware that their entire super, and often their insurance benefits, are up for grabs amongst the dependants they leave behind.
Under superannuation law, the Trustee of your super fund has the discretion and obligation to use this power. At this stage you might say to yourself, this does not apply to me, I have nominated my beneficiaries. Are your bases covered?
On the positive side, this power allows the Trustee to take into account a new spouse or family if the Superannuation Member never got around to updating those nomination forms. The downside is that this may mean that your “ex”, who you never got around to removing as a nominated beneficiary, may get their hands on your super after you have gone and it is too late to argue.
Well now you can overrule their discretion and truly have the final say about who receives your death benefit. Ensure that your super is paid, as you want, after your death. This feature is called Binding Death Benefit Nominations (Binding Nominations).
What are the benefits of making a binding nomination?
You get to remove any uncertainty about who receives your super (including insurance amounts) when you die. This means you can nominate exactly who gets what. This makes your Estate Planning more precise and effective.
Who can I nominate?
You can nominate any of your dependants as defined under the superannuation law – i.e. your current spouse (including your defacto) or your child of any age (including adopted children), or a person financially dependant on you at the time of your death (your mother-in-law who is living with you). You can also nominate your estate (your assets in your Will). Nominating your estate is the most tax effective method of distributing your assets.
You can split the benefit between people as long as you give details of those dependants and the proportional share you want to go to them.
Only the nominees who are dependent at the time of your death can receive your super.
Must I make a binding nomination?
No. The decision is yours to make. You can make a binding nomination at any time prior to your death.
What happens if I don’t make a binding nomination?
The Trustee distributes your benefits amongst your dependants and your estate in whatever way it believes is fair and reasonable. This is done taking into account the nomination you completed on your application form (remember, though, they are not bound by your nomination unless you made a ‘Binding Nomination’).
What if I have already named my beneficiary?
Any nominations made before December 1999 are not binding on the Trustee. The Trustee continues to take them into account when exercising its discretion, provided you do not make a ‘Binding Nomination’. However, if you make a ‘Binding Nomination’ now, you override any prior death benefit nomination you have made.
Are binding nominations effective forever?
No. Binding nominations are only valid for three years. Your super fund advises you when your nomination is about to expire. You can revoke or change your nomination at any time by sending your super fund a new binding nomination, which is witnessed by two independent individuals. It is important to note that if your nomination expires and is not renewed, your benefits are paid to your estate. Therefore, once you have made a binding nomination your super is not, in the future, payable at the discretion of the Trustee, even if the binding nomination is no longer effective.
How do I make a binding nomination?
Contact your super fund and ask them whether they allow you to make binding nominations. You will need to complete a special form and have your signature witnessed in a special way.
What happens if my nomination is invalid?
If your nomination is invalid for any reason, e.g. not signed properly, your super is paid at the discretion of the Trustee, to either your dependants or your estate.
Is there anything else I should consider?
You may want to consult an adviser and a lawyer to determine any tax and legal implications and to ensure that you achieve the optimal financial result for your dependants.
Bear in mind that superannuation money left to someone other than a spouse or dependant can attract up to 31.5% tax.
In making a binding nomination, you need to ensure that you have considered the needs of all your dependants when it comes to distributing your assets. The Trustee assumes you have made your decision carefully. It does not consider the need of other dependants who are not named as nominees and it does not exercise any discretion.