Superannuation Death Benefit Nominations – a reminder to update them

For Australians, superannuation (super) is one of the largest assets we’ll ever own. The sooner we start to accumulate super, the more we save and the more we will have by 65 when we can access our funds. As super is provided by private companies, every fund has different regulations including how and to whom your super is distributed if you pass away. It’s important to note that super isn’t governed by a Will; this calls for a specific document called a Death Benefit Nomination to determine the disbursement of your fund upon your death. This article highlights the importance of maintaining an updated and binding death benefit nomination with your super fund, prepared in accordance with the rules of the fund.

Superannuation nomination

You save, plan and grow your super throughout your entire working life. Nominating beneficiaries for your super is an important step to take. Often people miss this, as your super fund isn’t covered by a Will. Super funds have separate trust deeds which dictate that you need to nominate one or more beneficiaries, within a specific category of people based on their relationship to you.

How binding death benefit nominations work

A binding death benefit nomination (BDBN) is a written notice to your super fund with directions as to how to distribute your super death benefits in the event of your death. A BDBN is best prepared in conjunction with a wholistic Estate Plan, including the preparation of your Will and Powers of Attorney, to ensure the nominations made align with your overall plan, and to avoid any unintended consequences.

BDBN execution

For a BDBN to be valid:

• A BDBN must be properly executed in accordance with the rules outlined in the super trust deed;
• A BDBN must be in writing;
• A BDBN must be signed and dated by the member in the presence of two witnesses;
• A BDBN must not have expired.

Ensuring the BDBN complies with the Fund Deed

The fund’s trust deed is critical as it determines how the trustee deals with super entitlements on the death of a super member. Your fund’s trust deed indicates whether or not a BDBN can be made in the first place. The provisions of the deed should be checked by a solicitor, in particular if you are a member of a Self-Managed Superannuation Fund, before considering making a BDBN to ensure it allows for nominations. If the fund rules don’t permit nominations, then you won’t be able to direct the trustee in relation to death benefits via a BDBN.

The difference between binding and non-binding nominations

A binding death benefit nomination is a written direction made by you to the trustee that sets out the dependants and/or legal personal representative who is to receive your benefit in the event of your death. So long as the binding death benefit nomination is valid, the Trustee is bound to follow it.

A non-binding death benefit nomination is a written request made by you, that suggests to the Trustee which beneficiaries may receive your benefit in the event of your death. The Trustee has the final say as to who should receive your death benefits. The Trustee will consider your nomination but is not bound to follow it. The Trustee has the discretion to pay to any one or more of your dependant(s) or legal personal representative(s) or a combination of both and will undertake a detailed review of your family relationships and circumstances before making a decision as to the payment of death benefits, often causing lengthy delays.

Why it’s necessary to update nominations regularly

A BDBN is often valid for a maximum of three years and lapses if it is not renewed. For this reason, it is vital to update your binding death benefit nomination.

Risks of not updating binding death benefit nominations

Payment of a death benefit is left to the trustee’s discretion in the absence of some form of binding direction such as a BDBN. Trustees are obligated to handle the distribution of death benefits in accordance with the rules that govern the super entity. However, there is no legal requirement for them to provide these death benefit nominations to the members. As a consequence, the range of death benefit nomination options accessible to members within different super funds may differ and the consideration of the Trustee can cause lengthy delays.

Complete your BDBN

Ensuring the proper distribution of your super funds after your passing requires a proactive approach. As Australians, super holds a significant place in our financial landscape, and understanding its unique regulation is crucial. Given that super is not governed by a Will, the responsibility falls on BDBNs to determine the allocation of these assets. You can create or change your binding nomination at any time. Regularly updating your BDBN as part of an Estate Planning process or review which takes into account your entire financial, personal and family landscape and by doing so, ensures that your hard-earned assets are managed according to your intentions, which ultimately offers peace of mind to both you and your loved ones.

Next Steps

For more information about super and binding death benefit nominations please contact our specialist Wills, Estates & Succession Planning Team for advice.