Many superannuation funds allow their members to make a binding death benefit nomination. Trustees of a superannuation fund to act per a valid nomination, in the event of a member’s passing.
Trustees of a superannuation fund may be excused from acting according to a valid binding death benefit nomination where a court order has the effect of restraining or prohibiting the trustee from paying the benefit to a person nominated the binding death benefit nomination.
The Superannuation Industry (Supervision) Regulations 1994 prescribe the conditions for a binding death benefit nomination to be valid. The conditions include:
- The person(s)) nominated must be a dependant of the member or the member’s legal personal representative.
- If more than one beneficiary is nominated, the proportion of the benefit payable to each is ascertainable from the notice.
- The notice is in writing.
- The member signs and dates the notice in presence of two adult witnesses who are not beneficiaries.
- The witnesses sign and date the notice confirming their presence during the signing of the notice.
- The notice will cease after three years from when it was first signed or last confirmed or amended unless revoked. The governing rules of a superannuation fund may fix a shorter period.
A dependant for superannuation purposes includes:
- a spouse of the deceased.
- any child of the deceased (of any age).
- any person with whom the person has an interdependency relationship with.
It is not uncommon for single people to nominate one or both parents as beneficiaries to receive their superannuation benefits in the event of death. However, the death benefit nomination is likely to be invalid unless an interdependency relationship exists between the fund member and their parent.
A spouse includes:
- any person (including same-sex) with whom the person is in a relationship. This relationship is registered under a law of a State or Territory prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind prescribed for the purposes of that section; and
- another person who, although not legally married to that person, lives with that person on a genuine domestic basis in a relationship as a couple.
Binding Non-Lapsing Death Benefit Nominations
It is not uncommon for a superannuation fund to offer a binding death benefit option that does not reflect the above-mentioned conditions. A superannuation fund can also prescribe a binding non-lapsing death benefit nomination.
A non-lapsing death benefit nomination may extend for an indefinite period (i.e. it does not lapse after three years)
When making a non-lapsing death benefit nomination it is important to be familiar with the specific rules relating to the superannuation fund involved as they may impose additional restrictions and requirements on the making of death benefit nominations.
What happens when a Binding Death Benefit nomination is invalid?
Where a binding death benefit nomination is invalid, the governing rules of the superannuation fund dictates how a death benefit is paid.
Generally, the trustees of the superannuation fund will exercise their discretion in determining to whom, and in what form a death benefit is to be paid. Alternatively, a superannuation fund’s governing rules may stipulate how a death benefit is to be paid without a valid binding death benefit nomination. That may include directing that the death benefit be paid to the deceased member’s legal personal representative, thereby becoming an asset of their estate to be dealt with in accordance with the deceased’s will, or the laws of intestacy where the member dies without a valid will.
The payment of superannuation death benefits is a contentious area of law. The courts are often called upon to settle disputes amongst potential beneficiaries. Having a properly documented and valid binding death benefit nomination can ensure that superannuation benefits are passed to the correct people in a timely manner.
At Progressive Financial Solutions, we review your overall personal and financial position to help you put the appropriate strategies in place to maximise your superannuation. You can read more about our superannuation advice services here.