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Your Super: Wills vs Binding Nomination

 The Coach 

The Weekend Australian 

21-22 April 2018 

Q: My husband and I have just rewritten our wills. Our solicitor has instructed us to ensure we nominate each other as beneficiaries under our superannuation funds and that they be binding death nominations. Shouldn’t our wills cover our instructions on death and why does it need to be a binding nomination? 

A: your will is a legal document that sets out your wishes for the distribution of your estate assets on your death. 

Assets owned jointly as joint tenants are not covered by your will as ownership will revert to the surviving owner on your death. Your share of assets owned as tenants in common with other parties do form part of your estate and are dealt with via your will. Assets held in trust on your behalf are generally not dealt with under your will, but are governed by the terms of the applicable trust deed. 

Superannuation is an example of an asset held in trust on your behalf. As the trustee owns the assets in your behalf, the legal mechanism to instruct the trustee on how to distribute the proceeds of your superannuation on your death is called a death benefit nomination. 

A superannuation lump sum death benefit can be paid only to an eligible beneficiary or be specified to be paid to your estate/legal personal representative as the death benefit nomination. 

An eligible beneficiary must be a spouse, your child, an individual financially dependent upon you, or an individual with whom you have an interdependency relationship, where you live together, and one or each of you provide financial support and domestic support and personal care. 

There are two types of death benefit nominations: binding and non-binding. A non-binding nomination is not binding on the trustee of the super fund to pay out the funds to your specified beneficiary. In some circumstances, a superannuation trustee may allocate a portion of your superannuation benefit to an individual regardless of your nomination, provided they meet the definition of a beneficiary. 

A valid binding nomination compels the trustee to pay the death benefit to eligible nominated beneficiary. 

A binding nomination can be non-lapsing, where the nomination will never expire; or it can be lapsing, where the nominations expires every three years. 

A binding nomination must be signed in the presence of two witnesses over 18 and who are not nominated as beneficiaries. 

Presumably your solicitor has recommended binding death benefit nominations for your superannuation funds to ensure the proceeds are paid out to the surviving spouse without the risk of the trustee executing discretion to provide a benefit to other potential claimants. 

As the claim does not form part of your estate, (unless the estate was specified as the death benefit nomination) the death benefit would not be tied up with the conventional process of settling the estate, and the delays associated with a grant of probate. 

Most of your net worth and who receives the benefit may be determined by your superannuation death benefit nomination. 

Andrew Heaven is an AMP financial planner at WealthPartners Financial Solutions. 

Andrew@wealthpartners.net.au 

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