Thinking about death is daunting, but ensuring your affairs are in order will help to ease the emotional and financial from your loved ones when the time does come. People often run into trouble when they prepare a will without seeking legal advice, commonly in matters dealing with superannuation.
The starting point is that superannuation does not form part of your estate, and your will cannot be used to decide what happens with your superannuation when you pass away. This is because your superannuation is held in a trust and managed by the trustee of your superannuation fund.
If you pass away, the trustee of your superannuation fund must pay your superannuation to your ‘dependents’, and if you have multiple dependents, the trustee can decide the proportion to pay to each dependent.
For many people this is perfectly acceptable – as they want their superannuation to be paid to their spouse and/or children. However, if you are concerned by the trustee having the final decision, there is a way to force the trustee to pay your superannuation to specific dependents.
What is a Binding Nomination?
Superannuation funds allow you to sign and return a Binding Nomination (also called a ‘Binding Death Benefit Nomination’). A Binding Nomination allows you to force your superannuation fund to pay your superannuation to specific dependents, and also allows you to decide the percentage to be paid to each dependent. This Binding Nomination form can usually be downloaded from your superannuation fund’s website.
But, the Binding Nomination must be valid for it to be accepted by your superannuation fund.
This means you can only nominate ‘dependents’ (according to superannuation law!) to receive your superannuation. ‘Dependents’ are restricted to a spouse, children of any age, any person financially dependent on you, any person in an interdependency relationship with you, or your legal personal representative (e.g. the executor of your will).
You must also sign the Binding Nomination in the presence of 2 witnesses. Lastly, you must send your Binding Nomination to your superannuation fund, and wait to receive confirmation that the Binding Nomination you submitted is valid and has been allocated to your account.
Then, when you pass away, your superannuation fund will be forced to pay your superannuation as you have instructed.
Does a Binding Nomination last forever?
No, it doesn’t! A Binding Nomination is usually only valid for three (3) years from the date of signature, so it’s important you keep on top of this.
What if my situation changes (such as I enter into a new marriage or I have a new child)?
You can update your Binding Nomination at any time, and it’s important you do this when there is a change of circumstances. If the nomination is valid, the trustee must always follow it despite any changes in your circumstances. For example, you may separate from your partner but if the Binding Nomination has not been amended to reflect this, your ex-partner may still receive some or all of your superannuation.
What happens if I don’t have a Binding Nomination or it’s expired?
The trustee of your superannuation fund has the final say regarding which of your dependents receive your superannuation. This may mean it goes against your true intentions, therefore it’s important to ensure it is regularly updated and valid so it can reflect your wishes.
How can Waters Lawyers help?
Although Binding Nominations are separate from a will, it is something we often discuss and advise on at the time of creating your will. For more information or personalised advice, get in touch with our friendly team on (03) 5996 1600 to arrange an appointment or book online here.