5 things you should know about bind­ing death ben­e­fit nominations

It is impor­tant to con­sid­er your super­an­nu­a­tion enti­tle­ments as part of your estate plan espe­cial­ly when they do not form part of your estate. As super­an­nu­a­tion enti­tle­ments can result in sig­nif­i­cant dis­tri­b­u­tions to ben­e­fi­cia­ries, it is cru­cial to ensure that they are paid in accor­dance with your wishes.

A non-bind­ing nom­i­na­tion pro­vides guid­ance to your super­an­nu­a­tion fund about how to dis­trib­ute your super­an­nu­a­tion on your death but they are not oblig­at­ed to fol­low it. The trustee of the super­an­nu­a­tion fund (Trustee) has the final say on who receives your super­an­nu­a­tion on your death and your enti­tle­ments may not end up being paid to your intend­ed beneficiaries. 

How­ev­er, a bind­ing death ben­e­fit nom­i­na­tion (Bind­ing Nom­i­na­tion) allows you to ensure that your super­an­nu­a­tion is paid to your intend­ed ben­e­fi­cia­ries. A super­an­nu­a­tion fund is required to com­ply with a valid Bind­ing Nomination. 

Bind­ing Nom­i­na­tions apply equal­ly to retail super­an­nu­a­tion funds and self-man­aged super­an­nu­a­tion funds (SMSF).

We set out five things that every­one should know about Bind­ing Nominations. 

1. Not every­one can be nominated 

You can­not name just any­body in a Bind­ing Nom­i­na­tion. A Bind­ing Nom­i­na­tion can only be made in favour of your legal per­son­al rep­re­sen­ta­tive (ie your estate), your spouse, your chil­dren or some­one who has an inter­de­pen­den­cy rela­tion­ship with you. 

For the pur­pos­es of super­an­nu­a­tion, an inter­de­pen­den­cy rela­tion­ship is one where two peo­ple have a close per­son­al rela­tion­ship, live togeth­er and one or each of them pro­vides both finan­cial and domes­tic sup­port and per­son­al care. 

2. Bind­ing Nom­i­na­tions may expire

Gen­er­al­ly speak­ing, Bind­ing Nom­i­na­tions expire every three years, How­ev­er, some super­an­nu­a­tion funds have an option for a non-laps­ing Bind­ing Nom­i­na­tion, which means they do not expire and remain in place until they are revoked. You are free to revoke or change your laps­ing or non-laps­ing Bind­ing Nom­i­na­tion at any time.

3. Bind­ing Nom­i­na­tions need to be pre­pared carefully

In order for a Bind­ing Nom­i­na­tion to be valid and to ensure that your wish­es are car­ried out, Bind­ing Nom­i­na­tions must be pre­pared very care­ful­ly. Gen­er­al­ly, each nom­i­nee must be an eli­gi­ble nom­i­nee as set out above, the total of the allo­ca­tions for each nom­i­nee must add up to 100% and it must be wit­nessed properly. 

Bind­ing Nom­i­na­tions must be wit­nessed by two peo­ple over 18 years of age and the wit­ness­es must not be named in the Bind­ing Nom­i­na­tion or named in your will, if you nom­i­nate your legal per­son­al representative. 

Addi­tion­al­ly, where a Bind­ing Nom­i­na­tion is made for a SMSF, it is impor­tant to pre­cise­ly fol­low the terms of the SMS­F’s trust deed to ensure its validity.

4. Bind­ing Nom­i­na­tions must be sent to the trustee

To be effec­tive, a Bind­ing Nom­i­na­tion must be giv­en to the Trustee. Unlike a will, you can­not sim­ply make a Bind­ing Nom­i­na­tion and for­get about it. The Trustee must be aware of the Bind­ing Nom­i­na­tion to be bound by it. 

5. Bind­ing Nom­i­na­tions affect more than just your superannuation 

Super­an­nu­a­tion can often include more than just the con­tri­bu­tions made by your employ­er or you over your life­time. Total and per­ma­nent dis­abil­i­ty insur­ance and life insur­ance poli­cies held with­in a super­an­nu­a­tion envi­ron­ment will be paid into your super­an­nu­a­tion fund pri­or to it being paid to the ulti­mate ben­e­fi­cia­ry. In this case, the Bind­ing Nom­i­na­tion will also apply to how those insur­ance pro­ceeds are paid. 


In sum­ma­ry, as pay­ment of super­an­nu­a­tion enti­tle­ments after your death can result in sig­nif­i­cant dis­tri­b­u­tions to your ben­e­fi­cia­ries, you should con­sid­er a Bind­ing Nom­i­na­tion when prepar­ing your over­all estate plan to ensure your wish­es are car­ried out.