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binding death benefit nomination

Don’t forget your nomination!

Nathan Lear
Partner/Private Client Adviser
23 Aug 2016

When reviewing superannuation arrangements, it’s very important to consider how superannuation works in conjunction with estate planning objectives. At Hewison Private Wealth, we seek to ensure our clients are in the best financial position at all stages of their lives – part of this also includes handling their accounts after death.

A binding death benefit nomination, or death benefit agreement, is a written document that enables the trustee to decide exactly where they would like to direct their individual superannuation benefits upon death. A binding death benefit nomination directs the trustee of your super fund to pay your superannuation benefits to your specified beneficiary, whether it’s a self-managed super fund, industry or retail fund.

Does my Will take care of my superannuation?

Many people forget that superannuation is a non-estate asset, which means that it is not dealt with by your Will, unless you direct it to via a nomination. Therefore, a nomination is very important as in some cases, superannuants overlook nominations thinking that their Will would take care of this, which is not the case.

Who can I nominate as my beneficiary?

You can’t nominate just anyone as beneficiary. You must nominate a Superannuation Industry (Supervision) Act 1993 (SIS) dependant, which can include any of the following options:

  • Spouse of the member
  • Child of the member (any age)
  • Financial dependant
  • A person with whom the member had an inter-dependent relationship.

Additionally, you can nominate your Legal Personal Representative (LPR) as beneficiary. Your LPR is the executor of your Will. If you nominate your LPR, your superannuation benefits will be distributed in accordance with your estate as directed in your Will. Therefore, it’s very important that your Will is up to date.

If you don’t make a nomination, you risk your superannuation benefits not being distributed according to your wishes.

Reversionary Pensions

If you are in pension phase, you may elect for your pension to be reversionary to a SIS dependent. In this case, the pension would continue in the event of the death of the member, which is desirable in many cases as it assists dependants financially after the passing of the fund member.

Some additional points to consider

  • Lapsing or non-lapsing – A lapsing nomination only remains in effect for three years before expiration.
  • Binding or non-binding – A non-binding nomination does not bind the trustee to distribute the benefits to the prescribed beneficiary
  • Tax Considerations – The Australian Taxation Office places certain restrictions on who can receive death benefits tax free. The tax status of death benefits is also dependant on the underlying tax components.

Estate planning should be tailored to meet an individual’s specific objectives. If you believe you would benefit from a discussion on your estate planning requirements with a specialist financial adviser, please contact Hewison Private Wealth.

Any financial product advice provided is general in nature. It does not consider your needs, financial situation or objectives. You should consider the appropriateness of this advice to your circumstances before you act on it.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.