Superannuation may be the largest asset most people may have. It can also be a “sleeping giant” and can be forgotten until the time of retirement approaches.
What a lot of people don’t realize is that Superannuation funds are held in trust by the Trustee of the Superannuation Fund. This means that these funds don’t automatically become part of their estate should they die. As a result these funds won’t necessarily pass to the beneficiaries they have nominated in a will.
However, providing the rules of your Superannuation fund allow it, you can arrange a binding nomination to be put in place and through this state who is to receive the benefits of your Super money. This won’t automatically happen because of what is stated in a will.
Another important Superannuation fact to remember is that some Superannuation funds require members to renew a Binding nomination.
Time Lapse of Nomination
A binding nomination may be limited in time. A common period for a nomination to be in place is three years, after which it lapses and must be renewed. Alternatively, a nomination may remain in place until it is changed. It all depends upon the rules of your superannuation fund. We recommend that you contact your Superannuation Fund to discover what rules apply to your particular fund.
Binding vs Non-Binding Nominations
As the name implies, a binding nomination binds the Trustee to pay funds to your nominated beneficiary. The Trustee is required to pay the money directly from your Superannuation fund to your nominated beneficiary, following your death. The funds do not form part of your estate. A nomination which is non-binding allows you to nominate a beneficiary/s you wish to receive the funds from your Superannuation upon your death, but the Trustee of the Superannuation Fund is not bound to pay funds to the nominated beneficiary.
Effect on your estate
A binding-nomination ensures that Superannuation Funds go directly to those you have named as a beneficiary of those funds upon your passing. If a nomination is non-binding, the trustee has the discretion to either pay it to your nominated beneficiaries or to someone else, in particular to pay the funds directly to your estate. This may produce results you didn’t intend.
At Turner Freeman lawyers, we will provide appropriate estate planning advice which should include Superannuation. Contact our Wills and Estates team on (08) 8213 1000 to assist you today.