Nominating a beneficiary with your super fund provider may not be enough to secure your wishes when it comes to distributing your superannuation benefit and any associated life insurance.
If you have superannuation, particularly if it includes a life insurance component, you may require a specific Binding Death Benefit Nomination to ensure your nominated beneficiary receives the benefits you intended.
What is a Binding Death Benefit Nomination?
A Binding Death Benefit Nomination is a written direction to the Trustee of your superannuation fund that sets out who you want to receive your benefit in the event of your death. However you should firstly make enquiries from the Trustees of your superannuation fund if they will accept a Binding Death Benefit Nomination.
Why is it important?
What many people don’t realise is that superannuation benefits are not considered part of an overall estate.
So while a Will is a legally binding document that nominates who should receive what from your estate, it does not apply to your superannuation benefits.
When you set up your superannuation fund and any associated life insurance you would have nominated beneficiar(ies) who in most cases will receive the benefits upon your death.
However if there is any dispute or confusion between your Will beneficiar(ies) and your superannuation beneficiar(ies), the Trustees will be left with a decision about where to allocate the benefits – a decision you have no control over. This may result in lengthy delays and benefits being paid to unintended recipients.
A Binding Death Benefit Nomination provides greater certainty about who will receive your superannuation benefit in the event of your death. If your Binding Death Benefit Nomination is valid and in effect at the date of your death, the Trustee must pay your benefit to the beneficiaries you have nominated in the proportions set out in your Binding Death Benefit Nomination.
Who can I nominate as a beneficiary?
You can nominate one or more of your dependants and/or Legal Personal Representative (see the definitions for these below). The most appropriate beneficiaries to nominate in your binding death benefit nomination will depend on your personal circumstances. As there may be taxation implications arising, it is recommended that you seek professional advice before making a nomination.
How do I ensure it’s valid?
There are certain conditions that must be met to ensure that your binding death benefit nomination is valid. These are:
- The nomination must be in favour of one or more of your dependants and/or your legal personal representative
- Each dependant nominated must be your dependant at the date of your death
- The allocation of your benefit among the beneficiaries nominated must be clearly set out
- 100% of you benefit must be allocated. The entire nomination will be invalid if the allocation does not equal exactly 100%
- The nomination must be signed and dated by you in the presence of two (2) witnesses both of whom are over the age of 18 years and not nominated to receive the benefit, and
- The nomination must contain a declaration signed and dated by each witness stating the notice was signed and dated by you in their presence.
Your valid binding death benefit nomination may remain in effect even if your personal circumstances change. It is therefore important that you amend your Binding Death Benefit Nomination if there is a significant change in your personal circumstances such as marriage, divorce, the death of a nominated dependant or the birth of a child.
Important notes
A valid Binding Death Benefit Nomination remains in effect for three (3) years from the date it is first signed, last amended or confirmed. A Binding Death Benefit Nomination does not take effect until it has been received and accepted by the Trustee.
You can amend or revoke your Binding Death Benefit Nomination at any time. To amend your binding death benefit nomination you must complete a new Binding Death Benefit Nomination form and provide it to the Trustee. You must provide written notice to the Trustee if you wish to revoke it. If you wish to continue a Binding Death Benefit Nomination you must advise the Trustee in writing prior to the expiry date.
A valid binding death benefit nomination will override any preferred beneficiary nomination that you’ve previously made.
Some funds will not accept a binding death benefit nomination made under a power of attorney.
Definitions
Dependants
- Your spouse
- Your child (or your spouse’s child) of any age, including an adopted child, foster child, ward or child within the meaning of the Family Law legislation
- Any person who was in an interdependency relationship with you at the date of your death, and
- Any other person (irrespective of age) who in the opinion of the Trustee, is or was in any way financially dependent on you at the date of your death.
Spouse
- A person with whom you are legally married, or
- A person, whether of the same sex or a different sex, with whom you are in a relationship that is registered under an Australian State or Territory law, and
- A person, (whether of the same sex or a different sex), with whom you are not legally married but who lives with you on a genuine domestic basis as a couple.
An interdependency relationship
An interdependency relationship exists between two people (whether or not related by family) if they live together in a close relationship and one or each of them provides the other with financial and domestic support, and personal care. An interdependency relationship may include a parent and child, or brothers and sisters.
Legal personal representative
Your legal personal representative is the Executor of your Will or the Administrator of your Estate. You can nominate your legal personal representative to receive the whole or part of your benefit. If you nominate your legal personal representative on your binding death benefit nomination, your benefit will form part of your estate and be distributed in accordance with your will (if you have one), or in accordance with the laws that govern people who die without a will.
What next?
Every situation is unique and we have the expertise to help navigate any complexities that exist or could arise.