They say nothing is as sure as death and taxes. You might as well be prepared…

No doubt you have worked hard to accumulate the assets you have at whatever age you are. It is therefore important to ensure the right people benefit from them upon your death. A binding death nomination relates to your superannuation and is just one tool to be used when arranging your estate planning.

Unbeknownst to many, most death benefit nominations made by members of superannuation funds are not binding on the superannuation fund trustee. This means that the trustees of a superannuation fund may exercise a discretionary power to determine how benefit is paid and to whom. These nominations are referred to as “Non Binding Nominations”.

Case Study
John has two children, Jane aged 25 and Brian aged 21. John has nominated Jane as the executor of his estate and both children equal beneficiaries of
his superannuation benefits.

John dies. As executor, Jane steps into John’s role as trustee and has
100% control of the decision to pay the superannuation benefit. Jane’s
de-facto influences her to pay the full superannuation benefit to herself.
Brian was aware of his father’s nomination however the legislation allows Jane to make the decision as trustee. Brian has no recourse to lodge a complaint with the Superannuation Complaints Tribunal.

Obviously the above state of affairs is not what John intended.

What could John have done to remove any uncertainty about who received his superannuation benefit upon death?

Assuming John’s superannuation fund trust deed allowed it, John could have made a Binding Death Nomination. This would have ensured John’s superannuation benefits paid as he instructed.

If John had made a valid binding death nomination it would have removed the trustee discretion and Jane would have been required to follow the nomination. Brian would have a legal right to take action against Jane if she had breached her role as trustee and did not follow John’s binding death nomination.

Binding Death Nominations make Superannuation Estate Planning
more precise and effective.

Nominations can include any dependant (including adopted children) as defined under the Super Law, which include your current spouse (including a defacto), or a person financially dependent on you at the time of death. You can also nominate your Estate (your assets in your Will). This enables your Will to instruct how benefits are to be distributed upon your death.

Binding Death Nominations need to be witnessed by two independent individuals and are only valid for three years. Because of this limit, make a new nomination, or confirm an existing Binding Nomination every three years. If the Binding Nomination expires and is not properly renewed, benefits are paid at the discretion of the trustee of the Superannuation Fund.

Andrew is a Certified Financial Planner with Hewison & Associates Wealth Management andrew@hewison.com.au 9682 1900