Planning for the future: superannuation, your will and death benefit nominations

In brief: Having a valid binding death benefit nomination in place is essential to ensure that your superannuation is dealt with in accordance with your wishes upon your death. This is particularly important given that superannuation is often one of your most significant assets. 

Superannuation is not an estate asset 

Your superannuation is held by the trustee of your superannuation fund on trust. 

This means that, upon your death, your superannuation will not automatically form part of your estate, and it will not automatically be dealt with by your will. 

The trustee of your superannuation fund has the discretion to pay your superannuation upon your death, referred to as a "death benefit", to anyone they consider appropriate so long as this decision is lawful and complies with the rules of the fund itself. 

Importance of a binding death benefit nomination 

A binding death benefit nomination legally binds the trustee of your superannuation fund to distribute your funds in the way in which you choose, assuming that it is validly made. 

This can help reduce delays in the distribution of your superannuation funds upon your death, and may avoid potential disputes over the distribution that your superannuation fund selects. 

Superannuation is often times people's most significant asset besides, perhaps, real estate. A binding death benefit nomination, as a result, represents an essential component of an effective succession plan. 

Who may a death benefit nomination be made to? 

Under a binding death benefit nomination, you can decide whether to distribute your superannuation funds to a specific individual or individuals, or otherwise to your legal personal representative (LPR) (the executor of your will or the administrator of your estate) to be dealt with in accordance with your will. 

If you decide to nominate an individual who is not your LPR as the beneficiary or one of the beneficiaries of your superannuation, you must ensure that they are first considered a "superannuation dependent" under superannuation law. 

Superannuation dependents are, generally speaking, your spouse, your children, and any other person which you have an "interdependency relationship" with.

Whether a relationship is an interdependency relationship is determined with reference to a range of factors such as the duration of your relationship, the degree of dependency and emotional support between the two of you, and others.  

A nomination to anyone who is not a superannuation dependent will not be valid. 

Many superannuation funds provide basic guidance on who you may make a beneficiary under a death benefit nomination which you may refer to when making a death benefit nomination. 

Lapsing versus non-lapsing binding death benefit nominations 

It is important to know whether or not you have made or are able to make a lapsing or non-lapsing binding death benefit nomination. 

A standard binding death benefit nomination is "lapsing", meaning it will remain valid for a period of up to three years, at which time it will expire and a new nomination will need to be made. If it is not, the trustee of your superannuation fund will again have the discretion to distribute your superannuation in the way they consider appropriate. 

A non-lapsing binding death benefit nomination, in contrast, will continue to bind the trustee of your superannuation fund indefinitely. 

Not all trust deeds of superannuation funds permit a non-lapsing binding death benefit nomination to be made, so it is important to check with your superannuation fund itself. 

Non-binding death benefit nominations

You are also able to make non-binding death benefit nominations. 

A non-binding death benefit nomination, even if valid, is not binding upon a superannuation trustee and instead will act, essentially, as a statement of wishes. 

Under such a nomination, the trustee of your superannuation fund will still retain their sole discretion to distribute your superannuation upon your death in the way they consider appropriate, however they must have regard to your nomination. 

Key takeaways 
It is important to ensure that you have a valid death benefit nomination in place so that you can be certain your superannuation funds will be distributed in accordance with your wishes upon your death. 

It is also important to regularly check that this nomination remains in force and effect and reflects your current wishes and intentions. 

It is good practice to review your death benefit nomination whenever a significant change in your life has occurred.