When making a Will, superannuation is an important asset that people often overlook.

You might assume that your Will determines who receives your superannuation when you die. Unfortunately, that is not necessarily the case.

Superannuation is generally dealt with separately from your estate, and the rules governing who receives it can be different from those applying to the assets covered by your Will.

What is a superannuation death benefit nomination?

A superannuation death benefit nomination is an instruction to your superannuation fund about who you want to receive your superannuation when you die.

Your death benefit may include your superannuation balance and life insurance benefits held through your super fund.

Depending on your fund’s rules and the type of nomination you make, your nomination may be binding on the fund or simply express your preference.

Does my Will determine who receives my superannuation?

Not automatically.

Often, your superannuation fund trustee decides who receives your death benefit, subject to the fund’s rules and superannuation law.

You can also nominate your legal personal representative, meaning the executor or administrator of your estate. If the benefit is paid to your estate, it can generally be dealt with under your Will.

This may be useful if you want your superannuation to form part of your overall estate plan, rather than pass directly to particular individuals.

However, directing your superannuation to your estate is not always the best option. The right approach depends on your circumstances, your intended beneficiaries and the arrangements set out in your Will.

What is the difference between binding and non-binding nominations?

There are two common types of nominations.

Binding death benefit nomination

A valid binding nomination generally requires the fund trustee to pay your death benefit to your nominated eligible beneficiaries, in the proportions specified. This gives greater certainty that your wishes will be followed.

Non-binding death benefit nomination

A non-binding nomination tells the trustee who you would prefer to receive your superannuation.

The trustee makes its decision under the relevant rules and circumstances. The trustee considers your wishes but is not required to follow them. The result may differ from what you intended.

Ask your fund whether it offers a binding nomination and what requirements apply.

What are lapsing and non-lapsing nominations?

Some funds offer binding nominations that lapse after a specified period (often three years) unless you renew it.

Other funds offer non-lapsing binding nominations, which generally remain in place until changed, revoked or invalidated under the applicable rules.

Check your fund’s requirements and keep a record of when your nomination needs to be reviewed or renewed.

What happens if my circumstances change?

Your nomination should reflect your current wishes, not necessarily the wishes you had years ago.

For example, you may have nominated your spouse but subsequently separated or divorced. You may have remarried, had children, entered a de facto relationship or become part of a blended family.

These changes can affect your estate planning. An old nomination may no longer reflect who you want to benefit, and the consequences will depend on the nomination’s terms and your fund’s rules.

If you have not made a nomination, the trustee may have discretion to decide who receives your benefit or may pay it to your estate, depending on the applicable rules.

Reviewing your nomination when you make or update your Will is a sensible way to identify potential problems before they arise.

Who can receive my superannuation death benefit?

Superannuation law restricts who can receive a death benefit. Depending on the applicable rules, eligible recipients commonly include your spouse or de facto partner, your children, certain financial dependants, people in an eligible interdependency relationship, or your legal personal representative.

You cannot necessarily nominate anyone you choose. If you want your superannuation to benefit someone outside these categories, such as through a family trust, you may need to consider whether payment to your estate is appropriate.

This is particularly important for blended families, where you may want to provide for your current partner as well as children from an earlier relationship.

Is there tax on superannuation death benefits?

Tax can also be relevant when planning who receives your superannuation.

Whether tax is payable can depend on the recipient’s relationship with you, the type of benefit and other circumstances. A person who qualifies to receive a superannuation death benefit is not necessarily entitled to receive it tax-free.

If your superannuation represents a substantial part of your wealth, it is worth considering the potential tax consequences as part of your estate planning.

How can ensure my Will and superannuation nomination work together?

When preparing or updating your Will, check your superannuation arrangements as well.

Contact your super fund to confirm what type of nomination it offers, who you can nominate and what formalities you must follow. Make sure your nomination is valid, current and consistent with your wishes.

You should consider both your Will and a superannuation nomination if you want your estate plan to work as intended.

Need help with your Will?

Making a Will is an opportunity to consider more than just your home, savings and other assets. Your superannuation and any associated life insurance may be an important part of providing for your family.

Mid Mountains Legal can assist you with preparing your Will and considering how your estate planning arrangements fit together.

Contact us now for free, no-obligation telephone advice about making or updating your Will.