Understanding Superannuation Beneficiary Nominations

Superannuation is often a vital part of your financial planning, and ensuring your superannuation benefits are distributed according to your wishes is crucial. A recent review by the corporate regulator ASIC, titled Taking ownership of death benefits: How Trustees can deliver outcomes Australians deserve (found here) takes a look at some poor practices by some of our largest superannuation funds.

Below we provide an overview of the types of beneficiary nominations available for both accumulation and income stream accounts in an attempt to protect against excessive delays in your family accessing your superannuation benefit at a time of great need.

Types of Beneficiary Nominations

There are several types of beneficiary nominations you can make for your superannuation. These include:

Binding Nominations

Binding Nominations are legally binding. This means the trustee of your super fund must pay your death benefit to the beneficiaries you have nominated, provided the nomination is valid at the time of your death. Binding nominations often need to be renewed every three years to remain valid.

Non-Binding Nominations

Non-Binding Nominations are not legally binding. The trustee of your super fund will consider your nomination, however has the discretion to decide who receives your death benefit. This decision is based on your personal circumstances at the time of your death, as interpreted by your superannuation trustee.

Reversionary Nominations

Reversionary Nominations apply to income stream accounts. This type of nomination allows you to nominate a beneficiary who will continue to receive your income stream payments after your death. This nomination is generally not subject to renewal.

Non-Lapsing Binding Nominations

Non-Lapsing Binding Nominations do not expire, meaning they remain in effect until you change or revoke them. This type of nomination provides certainty and peace of mind that your superannuation benefits will be distributed according to your wishes.

Beneficiary Nominations for Accumulation Accounts

For accumulation accounts, you can choose between binding and non-binding nominations.

• Binding Nominations ensure that your superannuation benefits are paid to your nominated beneficiaries without the trustee's discretion. This can provide certainty and reduce potential disputes among family members.

• Non-Binding Nominations allow the trustee to use their discretion to determine the most appropriate beneficiaries based on your personal circumstances at the time of your death.

Beneficiary Nominations for Income Stream Accounts

For income stream accounts, you have the option to make reversionary nominations or binding/non-binding nominations.

• Reversionary Nominations allow your nominated beneficiary to continue receiving your income stream payments after your death. This can be a tax-effective way to provide ongoing financial support to your dependents.

• Binding and Non-Binding Nominations work similarly to those in accumulation accounts, with binding nominations providing certainty and non-binding nominations allowing trustee discretion as noted above.

Who Can You Nominate?

Eligible beneficiaries generally include:

• Your spouse (including de facto and same-sex partners)

• Your children (including stepchildren and adopted children)

• A person financially dependent on you at the time of your death

• A person in an interdependent relationship with you

• Your legal personal representative (executor of your estate)

Who Should I Nominate?

With numerous beneficiary nominations options available, choosing the right nomination type for you and your family is important. This decision can also have significant implications for your loved ones. A financial adviser or solicitor may be able to assist in determining the most appropriate nomination type for you and your family.

Finally, once a beneficiary nomination is in place, it is important to review your nomination regularly and update your beneficiary nomination as your circumstances change.

If you have any questions or need further assistance, feel free to reach out to us. We're here to assist.