If you don’t specify who you want to receive your super when you pass away, your super fund typically has full control in deciding who does. This means it may be a good idea for you to nominate the individual you want to get your super, but this nomination can be binding or non-binding and it’s important to know the difference.
Who gets my super if I pass away?
While your will dictates who gets what when it comes to most of your belongings and assets, your super may be treated differently. More specifically, your super fund trustee (the person or company managing your super) generally gets to decide how to distribute your super and is not required to take your will into account, and knowing this is important in order to ensure that your super balance goes to the individual that you want it to.
The main way you can do this is by making either a binding or non-binding nomination of a beneficiary and providing this to your trustee, so that it has an official record of who you have explicitly requested for your super to go to.
Who can superannuation death benefits be paid to?
A superannuation death benefit can’t be left (or paid) to just anyone. Under current superannuation legislation, namely the Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994, there are reasonably strict guidelines about who is entitled to receive – and who a super fund can pay – a death benefit to.
Essentially, death benefits must be paid to people who were a ‘dependant’ of the deceased member, and/or to the deceased’s legal personal representative (usually the executor of their estate). Under the legislation, the term ‘dependant’ can refer to:
- The spouse or de facto partner of the member
- Any child of the member, whether biological, step or adopted
- Any other person who was in an ‘interdependency relationship’ with the member at the time of the member’s death.
- The term ‘interdependency relationship’ is defined in the legislation, but it generally means the person and the deceased member must have lived together and had a close personal relationship with each other, and one or both of them must have provided financial support and personal care to the other.
Note that even if you’ve made a binding nomination regarding who you want to receive your super, the trustee is not obligated to act on your nomination if the person you choose isn’t a dependant or your legal personal representative at the time of your passing.
What are the different kinds of beneficiary nominations?
If you want to make a nomination, first you’ll need to decide between binding and non-binding. If you go with a binding nomination, you may need to then decide whether you want it to be lapsing or non-lapsing. You may want to speak to a qualified solicitor or other adviser to determine which option might best suit your needs.
Binding death benefit nominations
A binding death benefit nomination is a written notice provided to the trustee of your super fund which explicitly nominates a beneficiary for your super benefit in the case of your death. As mentioned, you can choose to nominate either a dependant or a legal personal representative to receive your super, and a dependant can be a spouse, child, or any other person (or people) who is financially dependent on you at the time of your death.
If you nominate your legal personal representative, then your super benefit will become part of your assets distributed as dictated by your will. If you don’t have a will, your super benefit will be distributed according to the laws that concern people who die without a will (intestate).
While a binding death benefit nomination can be a helpful way to make sure that your super benefit goes to your intended beneficiary, it’s important to note that not all people with superannuation can make a binding death benefit nomination. Not all super funds offer the option, and a super fund member can only make a nomination if the governing rules of their fund permit them to do so.
→Learn More: Making a Will: What’s Involved?
Lapsing vs. non-lapsing binding death benefit nominations
Some funds also offer the choice between a lapsing and non-lapsing binding nomination. As the name suggests, a lapsing nomination must be renewed or reviewed after a certain period (many funds go with three years), whereas a non-lapsing nomination is permanent unless you change or review it. However, not all funds will necessarily offer this choice, so be sure to check with your specific fund.
Non-binding death benefit nominations
A non-binding death benefit nomination is essentially you indicating who you’d like to receive your super, but allowing your super trustee the final say over who ultimately gets your super benefit. It’s more a guideline you provide to your fund that they take into consideration when deciding who to pay your benefit to, but are not obligated to follow if they think there’s someone who’d be a more appropriate recipient.
Whether or not you’re thinking of nominating someone to receive your super when you die, it’s important to consider whether your fund suits your needs. You can get started by comparing a wide range of super funds with Canstar.