You may or may not be aware, but your superannuation cannot typically be given away to someone under your Will because your Will only covers assets that you personally own (such as your car, your house and your bank accounts). Whilst it is in an accumulation or pension phase, your superannuation is a sum of money that is held for you in a trust managed by your superannuation fund and governed by superannuation laws.
After your death, the trustee of your superannuation fund will have discretion in deciding who to pay the balance of your superannuation death benefit to. In exercising this discretion, the trustee will collect information about your particular circumstances and details of all persons who are or could be considered a ‘dependent’.
You are able to limit the trustee’s discretion by nominating one or more of your dependents to receive your superannuation when you pass away. Different superannuation funds may offer different types of death benefit nominations depending on their governing rules, but it is common for them to offer either or both of a non-binding death benefit nomination and a binding death benefit nomination.
The Wills & Estates Law Team at Coutts can assist you in ensuring that your superannuation death benefit nomination has been validly completed and lodged, and can give advice about claiming the superannuation death benefit of a loved one who has passed away.
Who are your dependents?
Under superannuation law, the following persons are considered a dependent:
- Your spouse, including de-facto partner, same sex partner and former spouse;
- Your child, including adopted and step-children;
- Anyone who was financially dependent on you; and
- Anyone with whom you had an interdependency relationship (e.g. someone who had a close personal relationship with you, who lived with you and one or both of you provided the other with financial support, domestic support and personal care).
What is a binding death benefit nomination?
Most superannuation funds will allow you to make a binding death benefit nomination, which directs and binds the trustee to pay your superannuation death benefit to the person or persons you have nominated. However, you are only able to nominate a dependent, otherwise the nomination is not valid. You may nominate more than one dependent in equal or unequal proportions but the total amount of the proportions must equal 100%.
The nomination will only bind the trustee where it complies with the following formal requirements:
- It is in writing;
- It states the proportion of the benefit payable to each nominated beneficiary (if more than one) and the total is equal to 100%;
- It is signed by you in the presence of two witnesses who are over the age of 18 and who are not the persons nominated to receive a benefit; and
- It is signed and dated by the witnesses.
In most cases, a binding death benefit nomination will lapse after three years. It is important to review your nomination on a regular basis to check if it is up to date, or to amend the persons nominated should your circumstances change.
What is a non-binding death benefit nomination?
A non-binding nomination is still a written direction to the trustee to pay your superannuation death benefit to one or more of your dependents. The trustee is not bound to follow the direction you give regarding your preferred beneficiaries but will take your preference into account in determining the best method of distributing the funds after your death. A non-binding death benefit nomination does not lapse, but you should still review your nomination regularly.
What about self-managed super funds?
If you have a self-managed super fund (SMSF), someone will need to take your place as trustee after your death. This person is usually nominated in your SMSF Trust Deed, or may even be the executor of your estate. The person who steps in as trustee will then be bound by the rules of your SMSF Trust Deed when determining how to distribute your superannuation benefit and have regard to any death benefit nominations you have made as the member of the SMSF during your lifetime.
Our Wills & Estates Team at Coutts can review your SMSF Trust Deed and provide you with advice as to how you can make a binding death benefit nomination for your SMSF.
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