Binding Death Benefit Nomination

What is a binding death benefit nomination?

Your will does not control your super.

A binding death benefit nomination is a written direction that requires your super fund trustee to pay your super death benefit to the people you name, in the shares you set. Without one, the trustee decides who receives the money.

Super does not form part of your estate by default, so the instructions in your will do not reach it. For many Australians, super is the largest asset they own after the family home. A superannuation binding nomination is the document that decides where that asset goes.

A valid binding death benefit nomination removes the trustee's discretion. Provided it meets the fund's rules and super law, the trustee must follow it.

Who can you nominate as a superannuation beneficiary?

Super law only lets you nominate your dependants or your legal personal representative, which is the executor of your estate. Anyone outside these groups can only receive your super through your will.

How long does a binding death benefit nomination last?

In most retail and industry funds, a lapsing binding death benefit nomination expires three years after you sign it or last confirm it. Once it lapses, the trustee goes back to deciding who receives your super.

Some funds offer a non lapsing binding death benefit nomination. It stays in force until you change or revoke it, which removes the renewal risk. The trade-off is that it can go stale: a non lapsing binding death benefit nomination signed before a separation or a new marriage still binds the trustee unless you update it.

A self managed super fund follows its own trust deed. A binding death benefit nomination SMSF trustees accept may never lapse, or may need a set form, depending on the deed.

What makes a binding death benefit nomination invalid?

Most invalid nominations fail on paperwork: missing witnesses, an ineligible beneficiary, or a nomination that has lapsed. A trustee cannot fix these after you die.

Your fund will usually confirm receipt. Ask for that confirmation and keep a copy of the signed binding death benefit nomination form with your will.

What is the difference between a binding and non binding death benefit nomination?

A non binding death benefit nomination is a preference the trustee considers but does not have to follow, while a valid binding nomination must be followed.

Most default super accounts hold a non binding death benefit nomination. It gives the trustee a guide, and the trustee will still look at who depended on you at the date of death. That flexibility can help when circumstances change, but it also leaves room for delay and dispute.

A superannuation binding nomination gives certainty. A superannuation death benefit nomination of either type can be updated at any time, so the choice comes down to how much control you want and how settled your family situation is.

What happens to superannuation death benefits with no nomination?

With no valid nomination, the trustee decides who receives your super under the fund's rules and super law. The result may not match your will.

Superannuation death benefits with no nomination often take longer to pay. The trustee has to identify every possible dependant, weigh competing claims and give each person a chance to object. A former partner, an estranged child or a financial dependant can all come forward.

A super death benefit paid to estate is distributed by your executor under your will. That route can be exposed to claims against the estate, which is one reason to choose the path on purpose.

What is a reversionary pension?

A reversionary pension is an account-based pension that continues to a nominated person, usually your spouse, when you die. Payments keep going without a new application.

Because the pension reverts, your spouse has 12 months before its value counts toward their transfer balance cap. That gives time to plan. A reversionary pension sits alongside your nomination, and in most funds it takes priority over it for that pension account.

One disadvantage of reversionary pension arrangements is that they can only go to a dependant, and you usually cannot change the reversionary beneficiary without restarting the pension. In a blended family, that can lock in an outcome you later want to change.

When should you review your superannuation beneficiary nominations?

Review your superannuation beneficiary nominations after any major life event, and at least every three years. A nomination is only as good as the day you last checked it.

Does my will override my superannuation beneficiary?

No. Your will does not override a valid nomination, because super is paid by the trustee and not by your executor. Your will only controls super that is paid to your estate.

This is where many estate plans break. A will can leave everything to three children equally while the super nomination names only one. The super follows the nomination, and the will cannot correct it.

Being named as a beneficiary of superannuation also changes the tax that person pays. Adult children are not tax dependants, so they can pay tax on the taxable component. Our page on how to avoid death tax on superannuation explains how to plan for it.

How does Vista help with your binding death benefit nomination?

We review your nomination as part of your whole estate plan, so your super, your will and any pension point the same way.

A Vista adviser checks each fund's nomination type, its expiry, its witnesses and its beneficiaries. We compare it with your will, flag any super beneficiary who may face tax, and recommend whether a binding nomination, a non binding nomination or a reversionary pension suits each account.

We work with your lawyer on the will and with your fund on the forms. This sits within our wider superannuation advice service for Melbourne clients, in person or by video.