As the old saying goes, nothing is certain except death and taxes. Unfortunately this uncertainty extends to the question of who gets your super when you pass on.
None of us like to think about our mortality and how it may affect our loved ones – let alone the assets we've worked hard to acquire.
Sensibly many of us try to plan for this eventuality, at least in terms of the distribution of our assets, by having a valid will.
It may come as a shock to learn that your super and any insurance benefits attached to it, may not be dealt with in accordance with the wishes expressed in your will.
The trustee of the super fund will decide whether to pay your super to your estate.
The reason for this is because your super is held ‘in trust’ and must be dealt with in accordance with superannuation laws and the trust deed which governs the operation of your superannuation fund.
Many super funds allow members of the fund to nominate to the trustee where s/he would like the super to be paid.
There are two types of nominations: ‘non-binding’ or ‘binding’.
A ‘non-binding’ nomination merely provides guidance to the trustee regarding who will receive the super benefits. A discretion regarding payment of these benefits remains with the trustee of the super fund. In other words, the person you have nominated may or may not receive your super benefits upon your death.
A ‘binding’ nomination directs the trustee to pay the super benefits to the person nominated. This type of nomination takes away the trustee’s discretion.
Problem solved? Uncertainty removed? Not entirely! Most binding nominations are only valid for 3 years from the time the binding nomination is made. You must formally complete a new binding death benefit nomination form every 3 years. If you do not do this, the binding nomination will become non-binding.
Despite a challenge to a binding nomination can still be made by certain categories of people, for example, those in an interdependent relationship with you such as a child and/or your domestic partner, this type of nomination provides greater certainty regarding the distribution of your super.
If you don’t nominate any beneficiaries, the trustee of the super fund will normally pay the super benefits to your estate. The super benefits will then be dealt with according to the wishes expressed in your will.
It is critical that you check your super statement to see if you have a current ‘non-binding’ or ‘binding’ nomination. You can and always should check with your super fund to confirm what type of nomination, if any, you have and its currency.