"But my super will go to my beneficiaries under my Will, won't it?"
This is a common misconception we see every day. Superannuation is not an estate asset, and upon your death doesn't automatically flow to your estate. Generally, the trustee of a superannuation fund will pay a death benefit in accordance with the legislative requirements and its own governing rules.
A Binding Death Benefit Nomination is a way to stipulate who will receive your superannuation benefits upon your death.
What is a Superannuation Binding Death Benefit Nomination
Put simply, a binding death benefit nomination allows you to ensure that your hard-earned superannuation is distributed according to your wishes, and not at the discretion of a super fund trustee.
From a legal standpoint, a binding death benefit nomination provides a level of certainty and clarity that can mitigate potential conflicts among beneficiaries. By specifying who should receive your superannuation benefits and in what proportions, you reduce the risk of disputes arising among family members or other dependents.
It is important to remember that in order for a nomination to be binding, generally only dependents can be nominated, which is defined under legislation.
For the purposes of superannuation, a dependant includes:
a spouse (including de facto, opposite and same-sex);
children of any age (including adopted);
any person financially dependent on the member;
any person in an interdependency relationship with the member; or
a legal personal representative (LPR).
Depending on your circumstances, you can nominate one dependant (who would receive 100% of your benefits) or a number of dependants. When you make a binding death benefit nomination, the trustee is required to follow these instructions regarding the distribution of your superannuation benefits.
Advantages of Binding Death Benefit Nominations in Estate Planning
One of the primary advantages of using a binding death benefit nomination is the certainty and peace of mind it provides. By specifying the beneficiaries and their respective entitlements, you reduce the risk of legal battles and disputes that can often arise when there's ambiguity in the distribution process.
This is particularly important when someone may have numerous beneficiaries, such as former marriages, adoptions, and other complex family structures or arrangements.
Control & Asset Protection
Binding death benefit nominations give you control over how your superannuation benefits are divided. This can be particularly crucial in situations where you have dependents who need financial support, or if you want to provide for beneficiaries outside of the immediate family.
It can also be utilised for asset protection strategies. For example, if you have beneficiaries who might be exposed to creditors or other financial risks, a well-structured binding death benefit nomination can help protect your financial legacy by apportioning funds appropriately. This is where speaking with a financial specialist as well as a lawyer can help you make the most informed choice.
Key Considerations and Challenges
While a binding death benefit nomination offers numerous advantages, there are certain considerations and challenges to keep in mind:
The nomination must adhere to the specific requirements of your superannuation fund and meet legal standards for validity. Failure to meet these requirements could render the nomination invalid.
Revocation and Updates
Generally, there are two types of nominations; those that are valid for three years, and those that are non-lapsing (never expire). This will depend on your specific superannuation fund and its governing requirements.
A binding death benefit nomination can generally be renewed, revoked or amended at any time. Regularly reviewing and updating your nominations to reflect changes in your life, such as marriage, divorce, or the birth of new beneficiaries, is essential to ensure your wishes are accurately represented.
Understanding the definition of "dependents" according to your superannuation fund's rules and legal provisions is crucial. Different funds might have varying definitions that can impact the eligibility of certain beneficiaries.
A binding death benefit nomination should be aligned with your overall estate planning strategy, including your Will. Ensuring that these documents work together harmoniously is essential to avoid unintended outcomes.
Unless the person you nominate to receive your superannuation death benefit is a dependant or your Legal Personal Representative (LPR) at the date of your death, a binding death benefit nomination will not be valid. When a person does not meet these requirements, alternative estate planning arrangements will need to be made.
As part of our estate planning appointments, our lawyers can discuss your superannuation arrangements, and can assist in the preparation and completion of a binding death benefit nomination.
In some instances, appointing a legal personal representative (LPR) as the beneficiary of your superannuation death benefit can allow you to handle these monies through your estate. In this instance, under your Will, you can distribute these funds to any individual, company or other entity (e.g. charity) that under a binding death benefit nomination, you ordinarily cannot achieve.
Ultimately, we always recommend speaking with an experienced lawyer to ensure that any binding death benefit nomination, in addition to other estate documents such as a Will, achieves your desired goals and outcomes.
A superannuation binding death benefit nomination is a powerful legal tool in estate planning that provides you with control and certainty over the distribution of your superannuation benefits.
By thoughtfully considering your beneficiaries' needs, tax implications, and legal requirements, you can put in place a binding nomination that ensures your wishes are carried out.
Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.
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