Understanding Superannuation Death Benefit Nominations

Superannuation is often one of a person's most significant assets, yet many Australians overlook the importance of planning what happens to it after they pass away. One crucial aspect of this planning is making a valid superannuation death benefit nomination—a legal step that can help ensure your superannuation and any attached insurance benefits are distributed according to your wishes.

In this article, our Melbourne legal team explores what a death benefit nomination is, the differences between binding and non-binding nominations, who you can nominate, and the tax implications involved. Whether you're reviewing your estate plan or considering your first nomination, understanding your options can make a meaningful difference for your beneficiaries during a difficult time.

What is a death benefit nomination?

A death benefit nomination is a written instruction that you can provide to the trustee of your chosen superannuation fund setting out how you would like them, and any insurance benefits distributed when you pass away.

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

A death benefit nomination can be binding or non-binding. A binding death benefit nomination is a legal instruction to the trustee of your superannuation fund. The trustee must pay your superannuation to your nominated beneficiaries if you provide a binding death benefit nomination. Alternatively, a non-binding death benefit nomination acts as a guideline for the trustee when paying your superannuation after your death. The trustee is not legally required to follow your instructions on your non-binding nomination.  The trustee can use its own discretion and use your nomination as guidance. The trustee will consider the current law and the financial situation of any of your dependents when making its determination.

Who can a person nominate?

Each superannuation fund will have their own requirements as to who a member can nominate as a beneficiary. Usually, the following people can be a nominated beneficiary:-

1. Your spouse;
2. Children;
3. Financial dependent;
4. A person in an interdependent relationship with you; and
5. Your Estate.

If your superannuation is paid to your estate, it will be distributed in accordance with the terms of your will or pursuant to the rules of intestacy if you do not leave a valid will.

How are death benefit nominations taxed?

If a dependant receives your superannuation benefit as a lump sum, tax is not payable. If a dependant receives it as an income stream, tax may be payable. If anyone else receives your superannuation benefit, they can only receive it as a lump sum and tax may be payable. Your death benefit nomination can be lapsing or non-lapsing. A lapsing nomination will expire and needs to be renewed every three years. A non-lapsing nomination does not expire unless you cancel or update your nomination.

Need help navigating this process?

This can be a daunting task and you may not fully understand what is in the best interest of your loved ones. Our team of legal professionals are able to help navigate complex cases. Whether you are looking to set-up nominations or have a loved one who has passed away and nominated you, we can assist you through this process. Get in touch with out team to get started.