Superannuation and estate planning

If you're concerned about how your superannuation benefits will be distributed after your death, setting up a properly executed binding death benefit nomination can provide peace of mind.

Superannuation is often one of your most valuable assets. However, many people are unaware that it doesn’t automatically become part of your estate upon your death, meaning it’s not covered by your Will.

What is a Death Benefit Nomination?

A death benefit nomination is a formal request you provide to the trustee of your superannuation fund, asking that your death benefits be paid to either your estate or specific dependants. There are two types of nominations:

1. Binding Nomination: The trustee must follow your instructions and distribute your superannuation according to your wishes.

2. Non-Binding Nomination: This serves as a suggestion to the trustee, who can choose to exercise discretion and not follow your nomination.

By making a valid binding nomination, you can ensure your intentions for your superannuation are carried out. Without one, the trustee of your superannuation fund will decide how and to whom your benefits are paid upon your death.

What makes a nomination “binding”?

In a public offer superannuation fund, a death benefit nomination will be binding if all the following conditions are met:

• The governing rules of the superannuation fund allow for binding death benefit nominations.

• Each nominee is either your dependant or your legal personal representative (your estate).

• The distribution of benefits is clearly specified.

• The nomination is in writing, signed, and dated by you in the presence of two witnesses over 18 years old, neither of whom is a nominee.

• The witnesses have signed a declaration confirming they witnessed you signing the nomination.

• The nomination is confirmed or renewed every three years (unless it is a non-lapsing nomination).

For a self-managed superannuation fund (SMSF), the fund's governing rules may allow you to make a binding nomination without needing to renew it every three years or having it witnessed. The validity of the nomination will depend on the provisions of your SMSF deed.

What are the advantages of a Binding Death Benefit Nomination?

A valid binding nomination provides certainty that your superannuation will be paid to your chosen beneficiaries.

If your Will has been structured to achieve specific outcomes, a valid binding nomination directing your superannuation to your estate can ensure those benefits flow into your estate, allowing your estate plan to be executed as intended. Alternatively, a binding death benefit nomination can direct your superannuation to a beneficiary directly, potentially reducing the risk of disputes or claims against your estate.

When Should a Binding Death Benefit Nomination Be Reviewed?

Like your Will, your binding death benefit nomination should be regularly updated to reflect your current estate planning strategy and any changes in your circumstances or those of your beneficiaries. Be aware that binding nominations in public offer superannuation funds generally lapse after three years unless confirmed or renewed (unless it is a non-lapsing binding death benefit nomination), leaving the distribution of your superannuation to the discretion of the trustee if not updated.

The Importance of Estate Planning Advice

Superannuation, taxation, and estate planning can be complex areas. Seeking professional legal and financial advice is essential to ensure your superannuation is distributed in line with your wishes, minimising potential tax burdens and stress for your loved ones.

If you'd like to discuss how your superannuation fits into your estate plan or need assistance creating a comprehensive strategy that addresses your superannuation, we're here to help. Contact us today, and we’ll guide you through every step with care and expertise.