Superannuation is not an estate asset; on death it does not automatically flow to the estate of the deceased. The trustee of the super fund will generally pay a death benefit in accordance with the governing rules of the fund and relevant law. A binding death benefit nomination is a way to override this trustee discretion.
Put simply, a binding death benefit nomination is a legally binding nomination that allows you to advise the trustee who is to receive your superannuation benefit in the event of your death. In order for a nomination to be binding, it must be ‘valid’. One of the requirements of validity is that only ‘dependants’ can be nominated. Depending on your circumstances, however, you can nominate one dependant or a number of dependants. For the purposes of superannuation law, a dependant includes:
- a spouse (including de facto, opposite and same-sex)
- children of any age (including adopted or ex-nuptial)
- any person(s) financially dependent on the member
- any person(s) in an interdependency relationship with the member (applicable since 1 July 2004)
- a legal personal representative (LPR)
The role of binding nominations in estate planning
One of the biggest benefits you receive from having a binding death benefit nomination in place is peace of mind. This is especially the case if you have multiple beneficiaries (eg from previous marriages) who may have a claim on your death benefit.
In this case, you can nominate with reasonable certainty who you wish to receive your death benefit or, if being paid to more than one beneficiary, who receives what proportion.
Ease and speed
Another advantage of a binding death benefit nomination is the ease and speed with which a death benefit can be paid.
If your beneficiary needs quick access to your benefit, a binding death benefit nomination may allow a more timely distribution of your assets and your beneficiary won’t have to wait for the trustee or the deceased estate to determine the distribution.