What is a death benefit nomination ?
Just as your will governs your assets and other belongings when you pass away, a death benefit nomination governs who your superannuation goes to after your death. Thus, not having one of these in place leaves the decision up to your super fund. In order to ensure your super balance goes to who you want it to go to, you must make a binding or non-binding nomination.
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Get startedWho can your super benefits go to?
The requirements under the Superannuation Industry (Supervision) Regulations 1994 (Cth) regulate who can receive your super benefits. Essentially benefit nominations must be made to people who are dependent financially on yourself after your death. Under the current superannuation law ‘dependent’ refers to:
- The deceased spouse or de facto spouse
- A child of the deceased (any age)
- A person in an interdependency relationship with the deceased
- Any person the Trustee considers to have been wholly or partially dependent on the member at the time of the deceased death.
It is important to note, that nominations which don’t fit the above criteria are not guaranteed. Discussing your affairs with a Wills and Estates lawyer is worth considering. This will help put your mind and at ease and provide certainty for you and your family, by ensuring you get the right guidance.
Types of death benefit nominations
There are four main types of death benefit nominations that all act in different ways. Picking the right one for you is critical so again talking to a Wills and Estates lawyer will ensure you make the right decision.
Binding death benefit nomination
A binding death benefit nomination is a written direction to someones superannuation trustee. It sets out how they want their superannuation death benefit distributed and by law a trustee has to follow it. Admittedly this a good way to ensure your super fund benefit goes to your intended beneficiary.
Keep in mind, that not all super funds offer the option to make this nomination. So it is critical to check your funds policy to see if you can make a binding death benefit nomination. Also it worth keeping in mind that these nomination are only legally valid for three years.
Reversionary beneficiary
A reversionary beneficiary is used if you are receiving an income stream from a superannuation fund. In these cases, you can choose to nominate a beneficiary to continue to receive these payments. As a result it essentially allows you to direct future payments to a dependent after you die. This is beneficial as it allows your chosen dependent to continue to receive income.
Non-binding death benefit nomination
A non-binding nomination is a guideline for your funds trustee on how you want your whole balance, or parts of your balance distributed. This is not legally binding so the trustee retains the right to use their discretion to distribute the superannuation death benefits. Consequently, it offers no guarantee on where the funds will go and acts only as a guideline which the trustee takes into consideration.
Non-lapsing binding death benefit nomination
Think of this option as a permanent written direction given to the trustee. Thus, it acts just like a binding nomination in that, it must be legally followed by a trustee. The benefits of making your nomination non-lapsing is that it never expires. Your nomination will remain valid unless you review or change it, which can be done at any time. Due to the permanent nature of a non-lapsing nomination it is not offered by certain funds. Once again it is important to check what your fund will allow you to do.
Final thoughts
Above all having your affairs in order is important to ensure your wishes are carried out efficiently. Preparing a death nomination will help put your mind at ease, in knowing that your super balance is gong where it was intended. Undoubtedly making a clear decision now will help ensure your super balance goes where you want it to.
