When a person dies, a potential major asset that needs to be dealt with is their superannuation. Many people believe superannuation is paid out according to the terms in a will; however, this is not the case. A death benefit nomination is the only way to ensure your superannuation is being directed as per your wishes.
There are four types of death benefit nominations which can be made.
Binding Death Benefit Nomination
This is a written nomination made by you to nominate who your superannuation is to be paid out to on the event of your death. The trustee of your fund is legally bound by this nomination and must abide by its direction. The nomination will generally lapse after three years and must be renewed if you wish for the nomination to remain.
Non-Binding Death Benefit Nomination
As the name suggests, this nomination is not binding on the trustee of your fund; it is instead a guide as to who you wish your superannuation is to be paid to. The trustee will take this into consideration but will ultimately decide who receives your super.
Non-lapsing Binding Death Benefit Nomination
This nomination is essentially the same as a binding death benefit nomination, except that it does not need to be renewed every three years. The nomination will remain legally binding indefinitely unless you cancel or replace it with another nomination. The non-lapsing nature can be a benefit (in that it does not need to be renewed) but can also be a negative (in that your circumstances may change without you thinking to update your nomination). Some trust deeds do not allow a non-lapsing nomination to be made.
Reversionary Beneficiary
This nomination is specific to those who are drawing an income stream (pension) from their superannuation. Through this nomination, the member of the fund can nominate a beneficiary to continue receiving the income stream after their death. Assuming the nominated beneficiary is eligible to receive a retirement income stream, this nomination is legally binding to the trustee of the fund.
If a nomination is not in place, the trustee of your super fund will decide who your superannuation is paid to. The potential recipients may include a spouse, children, a person who is financially dependent on you or a deceased estate.
Having a nomination in place ensures the decision is with you and can ultimately be a tool in conjunction with your will for estate planning.
If you are interested in completing a death benefit nomination, contact your Superannuation Fund for details on the process.
Other related blogs
Do I need a binding death benefit nomination?
What happen if I die without a will?
Author: Allan Edmunds Email: allan@faj.com.au
