Binding Nominations
Overview
When you die the Trustee of your super fund decides
on who receives your superannuation. Many people are
blissfully unaware that their entire super (which may include
insurance benefits) is not an asset that is necessarily controlled
by their Will and that it can be distributed by the Trustee of the
super fund in their discretion.
Many people think that they have nominated
beneficiaries at the time of the formation of the superannuation
fund and that this is effective. They often do not be advised
that such nominations arenotbinding on the Trustee. Under
superannuation law, the Trustee of your super fund has the
discretion and obligation to use this power.
This discretionary power can be useful as it allows
the Trustee to take into account new or different family
circumstances that the superannuation member did not update in
nomination. It may be the case that the Trustee exercises its
discretion in a way that you would have wished. It is also
the case that they may not do so and it may:
- lead to disputes between potential beneficiaries;
- may end up with persons that would be contrary to your wishes;
and
- it lacks that certainty that you would wish for.
Binding Nominations
You can ensure that your superannuation is paid, as
you want, after your death by using a Binding Death Benefit
Nominations (Binding Nominations). If a valid Binding
Nomination is made, the Trustee of the superannuation fund must
follow it.
You are not obliged to make a Binding
Nomination. The decision is one for you to make and advice
should be sought on the appropriate options available to you.
Who can be nominated?
You can nominate any of your dependants as defined
under the superannuation law, such as:
- your current spouse (including your defacto);
- your child of any age (including adopted children);
- a person financially dependent on you at the time of your
death;
You can also nominate your estate such that it
passes under your Will. Nominating your estate can often be
the most tax effective method of distributing your assets.
You can split the benefit between people in
proportional shares.
What happens if you don't make a Binding Nomination?
The Trustee distributes your benefits amongst your
dependants and your estate in whatever way it believes is fair and
reasonable. This is done by taking into account a range of
factors. However, they are not bound by the nomination you may
have completed on your application form.
How long does a Binding Nomination last?
Binding Nominations are only valid for 3 years.
You can revoke or change your nomination at any
time by sending your super fund a new binding nomination.
For self-managed superannuation funds, the
opportunity may be to make Binding Nominations that last for in
excess of 3 years or alternatively amend the trustee deed to
specify to whom superannuation proceeds are to be directed
How to make a binding nomination
Contact your super fund and ask them whether they
allow you to make binding nominations. You will need to
complete a special form and have your signature witnessed in a
special way. It is most important that all of the
requirements for a valid nomination are satisfied.
Seek advice
You may want to consult an adviser and a lawyer to
determine any tax and legal implications and to ensure that you
achieve the optimal financial result for your dependants.
Superannuation money left to someone other than a
spouse or dependant can attract up to 31.5% tax.
Make sure that you are fully aware of the
implications for your particular circumstances.