What is a Binding Death Benefit Nomination?
Superannuation plays a key role in retirement planning, yet many overlook its importance or fail to document who will receive it after their death.
A Binding Death Benefit Nomination is a written instruction where a superannuation fund member nominates one or more individuals to receive their superannuation benefits upon their death.
This nomination is legally binding on the trustee of the superannuation fund, requiring them to pay the death benefits to the individuals specified in the nomination form.
If there is no nomination in place, the trustee has the discretion to determine how the death benefits are distributed, which can lead to disputes among beneficiaries, particularly in blended families.
Why is a Binding Death Benefit Nomination Important?
A Binding Death Benefit Nomination is important for several reasons, including:
1. Clarity of Intentions
Removes any ambiguity regarding your wishes.
2. Minimising Disputes
It reduces the likelihood of disputes among family members or other beneficiaries.
3. Faster Distribution
Clear instructions in your nomination form streamline the process of paying out the death benefits and help minimise delays.
Who Can You Nominate?
For a Binding Death Benefit Nomination to be valid, you should nominate eligible beneficiaries of your superannuation, which may include:
- Your spouse (including de facto partners)
- Your children (including stepchildren and adopted children)
- Your legal representative
- Someone who is financially dependent on you
Eligibility criteria can vary between superannuation funds.
How Long Does a Nomination Last?
In most cases, a Binding Death Benefit Nomination is valid for three years and will lapse if not renewed.
If your nomination is valid at your death, the trustee is legally obligated to follow your instructions and distribute the death benefits accordingly.
You can also change your nomination if your preferences change.
Updating a Binding Death Benefit Nomination
It is essential to update your nomination when your circumstances change, such as:
1. Marriage or entering a de facto relationship
Ensure your nomination includes your new spouse or partner if applicable.
2. Divorce or separation
Remove an ex-spouse or partner if you no longer want them to receive your superannuation benefits.
3. Birth of children
Add new dependents to your nomination, such as biological, step, or adopted children.
4. Death of a nominated beneficiary
Replace a deceased beneficiary with someone else.
5. Change in financial dependency
Update your nomination if someone becomes or ceases to be financially dependent on you.
6. Significant changes in your family structure
For example, if you become a stepparent, grandparent, or guardian of a dependent.
What is a Non-Binding Death Benefit Nomination?
A non-binding death benefit nomination, while similar in purpose, is not legally binding on the trustee of the superannuation fund.
It serves as a guide or a preference for the trustee when deciding how to distribute your superannuation benefits.
The trustee still has the discretion to determine who receives the death benefits, considering factors such as your relationship with potential beneficiaries and any financial dependency, meaning your superannuation benefits may not be distributed strictly according to your wishes if you use a non-binding nomination.
While a non-binding nomination offers some flexibility, it also carries the risk of delays or disputes in the distribution process, particularly if your intentions are not clear or your beneficiaries are in conflict.
Contact Us
For more information, contact us at Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.
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Related Blog – When & Why Update Your Will & Estate Planning
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