Why Binding Death Benefit Nominations Are Crucial for Your Superannuation

KEY TAKE-OUTS:

• Superannuation does not automatically form part of your estate and won’t be covered by your Will unless directed through a binding death benefit nomination.

• A binding nomination ensures your super goes to your intended beneficiary, while a non-binding nomination leaves the decision to your fund.

• Nominations must be valid, updated regularly, and made in favour of eligible beneficiaries to avoid disputes or unintended outcomes.

• Legal advice helps ensure your nomination is enforceable and aligned with your estate plan.

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Co-Authored by Daniel De Maria

One of the few assets which does not automatically form apart of one’s estate upon passing is their Superannuation. While these retirement funds can be one of the largest assets someone may hold at the time of their passing new research shows that many people may have no control over who inherits this substantial amount of wealth.

 

According to Super Consumers Australia, shared exclusively with ABC News:

• Only 54% of people aged 65 to 74 know they have made a binding death benefit nomination.

• At least 6.5 million Australians currently have no say in who receives their super.

• 36% of those surveyed admitted they had not made any nomination, despite an average balance of $101,000 in super, plus insurance benefits.

These figures highlight a widespread gap in estate planning that can leave families vulnerable to disputes and in some cases, outcomes that go against the deceased’s wishes.

 

What is a Death Benefit Nomination?

A death nomination is a legal direction that you provide to your Superannuation fund specifying who should receive the proceeds of your account when you pass away. If this is valid, the account must be released in accordance with the instructions.

 

When completing this document, it is vital to note of the two choices one can make;

• Non-Binding nominations – these are not enforceable nominations which act as a guide for the superannuation fund to follow when distributing the proceeds of one’s estate.

• Binding nominations – these are enforceable and must be distributed in accordance with its contents.

It is important to note that for a nomination to be binding, you can only nominate eligible beneficiaries which include:

• Your spouse or de facto partner

• Your children (of any age)

• Someone financially dependent on you

• An interdependent (a person in a close personal relationship who provides mutual financial, domestic, or personal support)

• Your legal personal representative (your estate)

 

If the person of people you are wanting to leave your superannuation to is not one of these categories, it is crucial that you speak with an estate planning lawyer to discuss ways to ensure this gift happens.

 

The Ashleigh Petrie Case

In 2019, Ashleigh Petrie tragically died after being involved in a car accident. At the time of her death, she had nominated her mother as the beneficiary of her Superannuation Account held with REST. However, due to the incorrect form being completed, the nomination was non-binding, meaning that it was not legally binding at the time of her death. This therefore meant that REST had discretion in distributing the benefit.

 

Her fiancée at this time was former magistrate Rodney Higgins who lodged a claim and eventually was awarded the entire $180,000 payout. The decision was justified on the basis that Ms Petire’s mother was not classed as a dependent while Mr Higgins was.

 

After a lengthy challenge with Mr Higgins and REST, who both stood by their decision, they eventually settled upon a confidential amount, with reports suggesting she received half. This case was not only prominent because of the 45-year-old age gap and their workplace relationship but also because it showed how easily someone’s wishes can be overridden when nominations are not binding.

 

Common Mistakes and Risks

Even when people do complete nominations, mistakes can undermine their effectiveness:

• Not updating regularly: Most binding nominations expire every two or three years, depending on the super fund. If yours lapses, the trustee regains discretion.
• Ineligible beneficiaries: Nominations must be made in favour of dependents or your legal personal representative, this being the executor or administrator of your estate. Choosing someone outside these categories’ risks invalidating the nomination.
• Over-reliance on a Will: Many people assume their Will covers superannuation, but it does not. Super is managed separately by the fund trustee unless directed through a binding nomination. To combat this, the Legal Personal Representative should be appointed so super proceeds can be distributed as per your Will.

 

How can Coutts help you?

With millions of Australians at risk of losing control over who inherits their super, a binding death benefit nomination is one of the simplest yet most powerful steps you can take. The Higgins–Petrie case shows the very real consequences of leaving this unchecked.

Speak to one of our estate planning lawyers who can provide you with advice as to how to set up your beneficiary nominations and will to ensure that your superannuation goes exactly where you intend.

Schedule an Appointment Now

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