What’s a binding death nomination?

What happens to your superannuation when you die?

It’s a fact of life that we will all pass away, so it’s important to consider what will happen to your superannuation account balance when that day arrives.

In Australia, superannuation has been specifically designed to be kept separate to your Estate.

That is, any superannuation monies (or insurances held within your super) will not necessarily be paid to the pool of assets or liabilities that your Estate holds at your date of death.

This is because the Australian government believes that any superannuation monies should be paid to your dependants (people who depended on your financially at your time of death), rather than potentially being absorbed by beneficiaries under your Will or creditors that are owed money by your Estate.

You can nominate who you wish your superannuation monies to be paid to in the event of your death, by way of a death benefit nomination or a binding death benefit nomination.

Who can be a beneficiary of my superannuation?

Under superannuation legislation, only your dependants may be a nominated beneficiary. 

A dependent may be: 

– Your spouse or de facto spouse (current or former);

– Your child ; and/or

– A person who was in an interdependency relationship with you at the time of your death. 

If you would like your superannuation to be paid by someone other than a dependant, you will need to nominate for your superannuation to be paid to your Estate by nominating your Legal Personal Representative. 

In this instance, your superannuation will form a portion of your estate and be distributed in accordance with the instructions in your Will. 

Types of death benefit nominations

There are different types of Death Benefit Nominations, all with various implications as to who may have access to your superannuation upon your death. 

Broadly, there are four types of death benefit nominations: 

1. Binding death benefit nominations: This directs the superannuation fund to distribute funds listed beneficiaries in accordance with your instructions. Normally it is valid for a maximum of three years and lapses if not renewed. If it is allowed to lapse, it is generally treated as a non-binding death benefit nomination. 

2. Reversionary beneficiary: If a person who is in receipt of an income stream from their superannuation fund dies, they can nominate a beneficiary to whom the payments will automatically revert to upon their death. Only one person may be nominated as a recipient of a reversionary beneficiary. 

3. Non-binding death benefit nomination: This is a nomination submitted to your superannuation fund guiding how you wish your superannuation benefits to be distributed after your death. It is not binding on the superannuation fund.  That is, even if the nomination is valid at the time of your death, the trustee of the superannuation fund retains ultimate discretion as to whom will be in receipt of your superannuation.  

4. Non-lapsing binding death benefit nomination: This directs the superannuation fund to distribute funds listed beneficiaries in accordance with your instructions. These nominations do not generally expire unless a member cancels or replaces it with a new nomination. 

Are there tax implications?

Yes!

The specific amount of tax that is paid is dependent on how the benefit is paid (either as an income stream or a lump sum) and who the beneficiaries are (dependants are considered different between taxation law and superannuation law). 

It’s therefore important to get legal and taxation advice before you make death benefit nominations.

What about life insurance?

It’s important to know that if you hold life insurance within your superannuation fund (which many funds offer by default to their members) that any insurance payment(s) will form part of your superannuation pool and be subject to your death benefit nominations.

What now?

Having your financial arrangements are in good order will ensure that you decide who is entitled to your superannuation monies in the case of your death. 

Know your rights and get legal and tax advice before you make a death benefit nomination.

Furthermore, if you are a potential beneficiary of a deceased’s superannuation monies and may be a dependant, you are entitled to legal representation and Littles can help you.

If you have already lodged a claim and it has been rejected by a superannuation fund or insurer, you may be entitled to have the decision reviewed through an internal resolution procedure.

If your complaint has been upheld, you may be able to litigate in a court or lodge a complaint with the Australian Financial Complaints Authority (AFCA).

There are strict time limits to challenge an insurer’s decision, so it’s important you seek legal advice as soon as possible.

What is the Littles difference?

Put simply, Littles are experts in superannuation and insurance law matters.

Our insurance team has helped thousands of consumers claim their entitlements, and our Head of TPD and General Insurance has extensive industry knowledge and insight on how to maximise your prospects of success.

We also speak your language, at sixteen languages and counting.  Forget paying for a translator or for a lawyer who doesn’t understand you and your cultural background.

All our superannuation and insurance law matters are conducted on a no win, no fee basis, and we don’t charge you upfront for any disbursements necessary to prosecute your claim. 

If you would like superannuation and insurance law advice, reach out to Littles today by using our free Claim Checker.

About the author

Littles’ Head of TPD and General Insurance, Rowan McDonald, is an expert in insurance and superannuation law.  Rowan has over thirteen years of experience in the industry and has prosecuted thousands of successful insurance claims for consumers.

Having worked in the industry for over a decade, Rowan has an extensive industry contact list and regularly presents to disability support groups, financial industry professionals and multicultural organisations.

Rowan has also advised some of Australia’s top insurers, giving him unrivalled insight into the claim process from all perspectives.  Rowan takes a pragmatic and common-sense approach to the advice he provides his clients.

For your free, personal consultation get in touch with Rowan today. 

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