What is a binding death benefit nomination?

Your super is something you work hard to save for your retirement years, but what happens to your super money when you die? If you don’t nominate who are the beneficiaries of your super, it can be left to your super fund to determine where your money should go.

Your death benefit nomination can be binding or non-binding and it’s important to know the difference. Your nomination must also be set up correctly or it could be declared invalid.

Who gets my super when I die?

When you die, your super balance and any benefits — known as your death benefit — are usually paid to your dependents or your legal representative, says the Association of Superannuation Funds of Australia’s Super Guru website.

A dependent is described by the Australian Taxation Office (ATO) as someone who, at the time of your death, was your spouse or de facto spouse, your child (any age) or someone who you had an interdependency relationship with. An interdependency relationship is where you had a close personal relationship with someone, such as you lived together or provided financial support or personal care.

If you don’t have any dependents, the money is generally paid to your estate.

→Learn More: How to write a will in Australia

Your money may still end up going to the people you wish to benefit from your super, but that may not always be the case.

That’s why it’s a good idea to nominate who are the beneficiaries of your death benefit so your money goes where you want it to go.

Binding vs non-binding death benefit nomination: what’s the difference?

A binding death benefit nomination means your super fund must pay your money to whoever you’ve nominated. You can nominate any number of dependents or if you want the money to go elsewhere, the ATO says you can contact your super provider to nominate that your money is paid to your legal representative who will then be able to distribute any money in accordance with your wishes in your will.

You may need to decide whether you want a binding nomination to be lapsing or non-lapsing. A lapsing nomination must be renewed after a certain period (typically every three years), whereas a non-lapsing nomination is permanent unless you change or review it.

A non-binding death benefit nomination is one where your super fund will consider your nomination when deciding how to distribute your money.

Super Guru says this could be an option if you think your circumstances may change over time, for example, if you have additional children or separate from your partner. But the website warns that a super fund is obliged to consider who were your dependents at the time of your death and may opt to direct your super money to them, and they may not be the beneficiaries you intended in your non-binding nomination.

How do I set up a binding death benefit nomination?

While a binding death benefit nomination can be a helpful way to make sure your super death benefit goes to your intended beneficiary, it’s important to note that not all super funds offer this option. Some may only offer non-binding nominations.

You need to check with your super fund to see what death benefit nomination options (if any) are available and see what’s required to set up a valid nomination. A super fund doesn’t have to follow the instructions in a nomination it considers to be invalid.

To be valid, a death benefit nomination usually has to be in writing, signed and dated by you and witnessed by two people who are not beneficiaries. Your super fund may have a simple death benefit nomination form you can fill out.

You may want to speak to a solicitor or other independent adviser to discuss what death benefit nomination option may best suit your needs.

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