Making Sure Your Superannuation Goes Where You Intend

As the new financial year is has begun, it is a good time to check in on your superannuation, not just how it’s performing but who will receive it if something happens to you.

Why super is treated differently
When someone passes away their superannuation does not automatically form part of their estate. Superannuation is held in a trust structure. This means your superannuation is held on trust by the trustee of the superannuation fund for the benefit of members. For that reason, your superannuation does not automatically form part of your estate when you die. Your super will only be paid to your estate if:

• you have made a valid binding death benefit nomination directing it there; or
• there is no valid nomination and the trustee decides to pay it to your legal personal representative (your executor in which case it will be dealt with in accordance with the terms of your will).

Without the right nomination in place, the trustee – not your will – may decide who receives your super.

Binding death benefit nomination – certainty and control
You can generally direct your super fund to pay your death benefit to one or more of your dependants (including a spouse, child, financial dependant or person in an interdependency relationship) and/or your legal personal representative.

The trustee must give effect to a valid binding death benefit nomination and has no discretion, provided it complies with the fund’s governing rules and superannuation law. The benefit must be paid as nominated to the people and in the proportions specified provided that:

• the nomination is valid;
• beneficiaries are eligible under superannuation law (for example, a spouse, child, financial dependant, person in an interdependency relationship, or your legal personal representative);
• it meets strict legal and fund requirements including correct wording and witnessing.

If you want your will to deal your super, you must nominate your legal personal representative using a binding death benefit nomination. Once paid to the estate, the funds are then distributed according to your will. Otherwise binding nominated payment will be made directly to nominated beneficiary outside the estate.

It is important to be aware that many binding nominations lapse after three years and will need to be renewed unless your fund allows for non-lapsing under its rules.

Non-binding nomination – guidance only
A non-binding nomination acts a guide only for the super fund trustee to consider but is not required to follow it. If the trustee considers a different distribution appropriate, the benefit may be paid to another eligible dependant or to the member’s legal personal representative. It can lead to outcomes that the member did not expect or want.

Getting it right from the start
Superannuation law is technical and fund‑specific, a nomination that looks correct may still be invalid. This can result in the trustee deciding who receives the benefit, rather than your wishes being followed. Getting proper legal and financial advice can help ensure your nomination:

• is binding, valid and enforceable;
• aligns with your will and broader estate plan. Nominations should be reviewed regularly – especially after major life events such as separation, divorce, marriage or birth of a child; and has not lapsed.