Superannuation is commonly the largest asset owned by individuals outside of the family home. It is often assumed that superannuation will form part of your estate on your death and distributed in accordance with the terms of your Will, however this is not necessarily the case.
In Australia, there are a range of types of superannuation funds, including:
- corporate funds;
- industry funds;
- public sector funds;
- retail funds; and
- self-managed superannuation funds (“SMSF”).
Upon receiving a death notification, the trustee of your superannuation fund will review their records to determine whether the deceased member has made a valid death benefit nomination. The trustee of a SMSF will also review the terms of the SMSF Trust Deed.
There are various types of death benefit nominations that you may make:
- Lapsing Binding Death Benefit Nomination: this is a written nomination by you as to who will receive your superannuation benefit on your death. The term “lapsing” generally means that it will lapse after a period from the date it is made (commonly 3 years). If it is valid at the time of your passing, the trustee must comply with your nomination.
- Non-lapsing Binding Death Benefit Nomination: this is a written nomination by you as to who will receive your superannuation benefit on your death. Providing it is valid at the time of your passing, the trustee must comply with your direction.
- Non-binding Nomination: as the name suggests, this is a guide provided to the trustee of your superannuation fund as to who you wish to receive your superannuation benefit on your death. Even if the nomination is valid on your death, the trustee is not obliged to comply with your wishes.
- Reversionary Beneficiary Nomination: if you are in receipt of an income stream, you may be able to make a written direction as to whom the payments will revert to on your death (typically your spouse).
Please note: it will depend on your superannuation fund as to whether it is possible to make non lapsing binding death benefit nominations.
Where a deceased member has not made a valid death benefit nomination, the trustee may exercise their discretion to determine who will receive the deceased’s superannuation benefit. Therefore, to ensure your wishes as to intended beneficiaries are complied with, it is important to make a death benefit nomination.
We suggest that you consider your superannuation death benefit nominations with your wider estate plan (including your Will, Enduring Power of Attorney and company Power of Attorney). Here at The Small Business Lawyer we offer a competitive fixed fee to draft your estate planning documents. If you would like to discuss your estate planning, please contact us to arrange a consultation. Our initial consultation may be held in person or via Zoom.