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Superannuation & Binding Death Benefit Nominations

                                                                                                                            

               Disclaimer: This publication contains comments of a general nature only, and is provided as an information service.
                               It is not intended to be relied upon as, nor is it a substitute for specific professional advice.

 

 

 

When making a Will, most people do not realise that their superannuation death benefit does not automatically form part of their estate and will not- without proper nominations in place- be distributed in accordance with their Will.

Generally speaking, only assets that are held in the sole name of the Will maker, such as the family home, investment property, car, shares, savings, and investments will form part of an estate and can be dealt with under the person’s Will.

Superannuation benefits, on the other hand, are held in trust by the trustee of the super fund and different rules apply. The most important thing to keep in mind is, that without a valid binding nomination in place, the trustee of the superannuation fund will ultimately have discretion on how the funds will be distributed. There are four types of death nominations (emphasis added):

  1. Binding death benefit nomination (BDBN): A written direction from a member to their superannuation trustee directing how some, or all of their superannuation is to be distributed. Please note that this kind of nomination is generally valid for a period of three years, and if it had lapsed at the time of the member’s death, the trustee is not bound by law to follow it.
  2. Reversionary beneficiary: A member in receipt of an income stream can nominate a beneficiary to whom the payments automatically revert upon the death of the member. If the nomination is valid at the time of the member’s death, the trustee is bound by law to follow it.
  3. Non-binding death benefit nomination: A written guide by a member about how they wish some or all of their superannuation death benefits to be distributed after their death. With a non-binding nomination, the trustee retains discretion on how a member’s superannuation is distributed on their death- whether to the deceased’s dependants who are not named in the nomination or to their estate.
  4. Non-lapsing binding death benefit nomination: When provided for in the Superannuation Trust Deed, a member can make a non-lapsing binding death benefit nomination, directing the trustee on how they wish for some or all of their death benefits to be distributed. These nominations can remain in place indefinitely unless a member cancels it or replaces it with an updated nomination. Like the BDBN, the non-lapsing nomination binds the trustee to the member’s nomination.

With Superannuation often forming a large portion of a person’s financial holdings, it is important to make sure that the proper nominations are in place to ensure that superannuation is distributed to the intended beneficiaries.

With either Self-Managed Superfunds or industry Superfunds, it is important to review your nominations, to ensure that they continue to remain valid and accurately reflect your intentions.

Please contact Nevile & Co for further information or enquiry and advice on how to do so.