Binding Death Nominations
A Binding Death Nomination allows you to nominate a beneficiary to whom your superannuation benefits will be released upon your death. This can be done two ways:
- 1. Lapsing nomination - a nomination which expires every three years
- 2. Non-Lapsing nomination - a nomination which does not expire (remains indefinitely)
Superannuation - Binding Death Nomination
Consequences of failing to make a Binding Death Nomination
If you do not validly execute a Binding Death Nomination, then the trustee of your superannuation policy has the discretion to decide who is to benefit from your superannuation policy and how it is to be paid. This is often determined by identifying your dependants (i.e. spouse, children) and making a decision as to how to apportion the benefit based on their needs and the extent of their dependency on you. There are instances where the trustee may determine to nominate your estate as the trustee (this is explained in more detail below.
It is important to note that with respect to a self-managed superannuation fund, the provisions of the Deed which establishes that fund will dictate how you can make a binding death nomination and the expiry (if any) of that nomination.
Nominating the Estate as the beneficiary of your superannuation policy
There are both advantages and disadvantages to nominating your estate as the beneficiary of your superannuation policy. The primary advantage of doing so is that your superannuation benefit will form part of your estate and will be distributed in accordance with the terms of your will i.e. to your nominated beneficiaries.
However, under legislation, all debts of the Estate must be paid first before any distribution is made. Therefore, if your monies from your superannuation policy form part of your estate, then those funds may be used to cover the debts of the estate before ever reaching your nominated beneficiaries. Moreover, should a family provision claim under the Family Law Act 1982 be made against the estate, the monies from your superannuation policy would form part of the pool of assets to be distributed.
It is therefore imperative that you ensure that your superannuation nomination is up to date to ensure that the people that you most care about benefit from your Superannuation.