Contrary to popular belief, it is generally the Trustee of your superannuation fund who will decide who receives your Super after you die. Many people are unaware that all of their hard-earned Super (often also including any insurance benefits) are up for grabs amongst all of their ‘dependants’.
Many people would now be thinking “well that doesn’t apply to me because I told my Super fund who I want my super to be paid to”. However, there are a few different types of nominations that a person may make. The most common types are a “binding” nomination and “non-binding” nomination.
While the Trustee will consider a non-binding nomination when it is deciding who your benefits will be paid to, they are under no obligation to follow your direction, hence the term non-binding.
A binding nomination on the other hand will generally mean that a Trustee must pay your benefits to the person or persons that you have made a binding nomination in favour of. It is important to speak with your Super fund as each fund has its own rules. It is often the case that any binding nomination made will expire after three years.
Who can I nominate?
A person can nominate any one of their “dependants” as defined under superannuation law. Broadly speaking, the following categories of person are defined as a “dependant”: –
- Your current spouse (which includes a de facto spouse);
- Your children (which includes any adopted children and your spouse’s children); and
- Any person who is financially dependent on you (for example, a grandchild you are raising).
It is entirely up to you whether you make a binding nomination, non-binding nomination, or no nomination at all, although it is important to consider your Superannuation as part of any effective estate planning. As time goes on, superannuation is forming a larger part of an individual’s estate, and can be a very valuable asset which should be effectively dealt with after your death.
Another thing to consider before making your Super beneficiary nominations, is the different way benefits may be taxed when distributed by the Trustee of your super fund after you die. Generally speaking, benefits paid to spouses and children under the age of 18 years are tax free while most other beneficiaries will have their benefit taxed.
The situation becomes even more complex if you are involved with a Self-managed Super Fund, and it is essential to speak with one of our experienced and knowledgeable estate planning lawyers today to receive advice relevant to your situation.
Of course, while it is important to consider your Superannuation as part of your estate planning, it is probably of even greater importance that all your assets are considered as a whole to ensure that your hard work over life is rewarded with your assets being distributed according to your wishes upon your death.
If the above article applies to you, contact Turner Freeman lawyers today on 13 43 63. We have Wills & Estates lawyers who specialise in Superannuation and Life Insurance Claims. Our New South Wales offices are in Sydney, Parramatta, Campbelltown, Newcastle, Penrith, Wollongong and Gloucester.