Superannuation death benefit nominations in Victoria

Superannuation is often one of the biggest assets a person leaves behind, and yet it’s also one of the most commonly overlooked parts of estate planning.

A will doesn’t automatically control who receives your superannuation after you pass away. In many cases, your super fund will decide who receives the benefit unless you’ve made a valid death benefit nomination.

That can come as a surprise to families, particularly after separation, remarriage or major life changes, where older nominations may no longer reflect your wishes.

Whether you’re updating your will, reviewing your estate planning or simply trying to get organised, it’s worth understanding how superannuation death benefit nominations work and whether your current arrangements still make sense.

What is a superannuation death benefit nomination?

A superannuation death benefit nomination is a direction you give to your super fund about who should receive your superannuation if you pass away.

Depending on the type of nomination you make, your super fund may be required to follow your instructions (no matter how old they are) or decide who receives the benefit themselves.

And it’s not just the money in your super. Your superannuation death benefit can include your super account balance, life insurance held within super and certain other benefits connected to your account.

What surprises people is that superannuation doesn’t automatically form part of your estate. That means your will may not control who receives it unless specific arrangements are in place.

Does your will control your superannuation?

Not necessarily. Unlike assets such as property, bank accounts or personal belongings, superannuation is usually held in trust by your super fund. Because of this, the trustee of the fund is responsible for deciding how death benefits are paid unless there is a valid binding nomination in place.

In some situations, your superannuation can be paid into your estate and distributed according to your will. However, this generally requires either a valid nomination directing the benefit to your legal personal representative or a trustee’s decision to pay the benefit to your estate.

This is why estate planning should never focus on the will alone. Your superannuation arrangements should also be reviewed to make sure everything works together properly. Understanding the type of nomination you have in place is an important part of that process.

Binding vs non-binding death benefit nominations

There are two main types of superannuation death benefit nominations.

Binding death benefit nomination

A binding death benefit nomination directs the trustee of your super fund to pay your death benefit to the person or people you have nominated, provided the nomination is valid under the rules of the fund.

In most cases, the nomination must be completed correctly, nominate eligible beneficiaries and comply with the requirements of the fund. Some nominations also require witnesses and may expire after three years unless they are non-lapsing.

A valid binding death nomination provides greater certainty about who will receive your superannuation.

Non-binding death benefit nomination

A non-binding nomination is more like a statement of preference. The trustee will consider your wishes, but they are not legally required to follow them. The benefit may ultimately be distributed differently depending on the circumstances at the time of your death.

This can lead to delays, disputes or outcomes that do not reflect your wishes.

What happens if there is no nomination?

If there is no valid superannuation death benefit nomination in place, the trustee of the super fund will decide who receives the benefit.

The trustee will generally consider factors such as your relationship with potential beneficiaries, financial dependency, family circumstances and any competing claims.

This process can become more complicated in blended families or situations involving separation, estranged relatives or competing financial dependency claims.

For example, a former partner may still be considered, adult children may dispute the decision, or current spouses and children may both make claims over the same benefit.

Without clear instructions, the process can take longer and may increase the likelihood of disputes between family members.

Who can receive your superannuation death benefit?

Superannuation law limits who can receive death benefits directly from a super fund.

Generally, eligible beneficiaries include a spouse or de facto partner, children, someone financially dependent on you, a person in an interdependency relationship with you, or your legal personal representative, meaning your estate.

Who qualifies as a dependant for superannuation purposes can sometimes differ from what people expect. For example, adult children can often receive superannuation death benefits even if they are financially independent.

Common problems with outdated nominations

One of the biggest issues with superannuation death benefit nominations is that people often complete them once and never review them again.

Relationships, financial circumstances and family structures can all change over time, but the nomination held by the super fund may stay exactly the same.

A common example is where someone remarries and updates their will to provide for their new spouse, but their superannuation nomination still directs benefits to a former partner or adult children.

In some situations, the super fund may still be required to follow that nomination if it remains valid.

How often should you review your nomination?

As a general rule, your superannuation death benefit nomination should be reviewed whenever there is a significant life change.

That may include marriage, separation, divorce, having children or grandchildren, retirement, major financial changes or updating your will or estate plan.

It is also worth checking whether your binding nomination has expired. Some nominations lapse after three years unless renewed.

Reviewing your nomination regularly can help reduce uncertainty and avoid unnecessary disputes later.

Setting up a binding death benefit nomination

The process differs slightly between super funds, but generally involves contacting your super fund, completing the correct binding death benefit nomination form and nominating eligible beneficiaries.

Some funds also require witnesses and periodic renewal of nominations. Because the rules can vary between funds, it’s important to check the specific requirements that apply to your superannuation account.

Making sure your super and estate plan work together

For many Australians, superannuation is one of their largest assets. Despite that, it’s often treated separately from the broader estate planning process.
A well-prepared will is important, but it may not deal with your superannuation unless your nominations and estate planning arrangements are properly aligned.

At Phillips & Wilkins, we can assist with wills, estate planning and reviewing your superannuation death benefit nominations so your arrangements work together as intended.

Speak with our friendly team today on (03) 9480 1155, or send through an enquiry online.