Superannuation - Death Benefits - Nominating Beneficiaries
It is important to remember that your superannuation funds are not automatically dealt with in your will. If you do not specifically tell the trustees of your superannuation fund who should receive your superannuation benefits after your death it is the trustees of the fund who will decide how your funds are distributed. The trustees will distribute your benefits among your dependents and your estate in whatever fashion they believe is fair and reasonable in the circumstances unless you have put in place a "binding death benefit nomination".
Who can you nominate as a beneficiary?
• Your spouse – they can be your legal or de facto spause, who lives with you on a genuine domestic basis.
• Your children of any age – they can be step-children, adopted or "ex-nuptial".
• The executor of your will or administrator of your estate – your legal personal representative.
• Anyone with whom you share an “interdependency relationship”.
An "interdependency relationship" is defined as a relationship between two people who have:
- a close personal relationship; and
- live together; and
- one or each of them provides the other with financial support; and
- one or each of them provides the other with domestic support and personal care.
An interdependency relationship may also exist where a close personal relationship exists between the two persons but because of a physical, intellectual or psychiatric disability, one or more of the other conditions are not met.
Note that you can split the benefit between any number of people as long as you provide details of those dependants and the specific share they should each receive.
It is important to appreciate that only the nominees who are dependent at the time of your death can directly receive your superannuation. If you don't have any qualifying dependents then you should nominate either your legal personal representative or the executor of your will. If there are no other dependents, then the funds will be almost certainly distributed to your estate for disposition through your will.
Note that binding nominations are typically only valid for a period of three years, and your super fund should advise you when your current nomination is about to expire. You can revoke or alter your nomination at anytime by sending your super fund a new binding nomination – which needs to be witnessed by two independent individuals. It's important to note that if your nomination expires and you fail to renew it, your benefits will then be paid to your estate. Once you've made a binding nomination your superannuation is not, in the future, payable at the entire discretion of the trustee.
Note that there also exist "non lapsing binding death benefit nominations" which, as the title suggests, are permanent nominations. These are not subject to the requirement that they be reviewed every three years, and are not all funds will allow nominations of this nature. The concern is that nominations should be subject to regular review and a non-lapsing nomination risks funds being distributed in a fashion which reflects history, rather than current circumstances.
Finally, you can also have a "non-binding nomination", which merely informs the super fund trustees about who are your preferred beneficiaries. In this situation you are merely indicating a preference, the trustees still retain the discretion to make the final decision with respect to any distribution, taking into account your preferences.
If there is any complexity at all in your situation, we suggest that prior legal and/or tax advice is sought in terms of making any binding nomination. Bear in mind that leaving superannuation funds to someone who is considered a non-dependents under tax law can attract tax of up to 32%.