How to Ensure Your Superannuation Goes to the Right Person
Superannuation is generally not dealt with under your will as this money is held for you by the trustee of your super fund for your retirement.
This trustee of a super fund generally has the responsibility of deciding how and to whom your death benefit is awarded. When considering the distribution of money held in a super fund, it is important to consider the options available which can ensure your wishes are fulfilled.
Who can receive my superannuation funds?
Legally, superannuation can only be paid out directly to dependents named as beneficiaries of your super fund or to a legal representative (the executor or administrator of your estate).
This includes a spouse, de facto partner, children (biological, adopted and ex-nuptial of any age) or someone whom you have an interdependency relationship. This also covers someone who relies on you to meet daily living expenses and someone who shares major financial commitments such as a mortgage repayment.
If a person wishes for their superannuation death benefits to go to someone who does not fall within the above category, such as a sibling or charity, they will need to make a nomination for a legal professional representative to deal with it in their will.
Options for distributing superannuation death benefits
If you have specific wishes for the payment of your superannuation, it is highly advisable to nominate the people you wish the money to go to. This nomination can either by binding or non-binding.
- A non-binding nomination acts as a guide to the trustee in assigning where the money should go, as they will have ultimate say and are not legally obliged to abide by your wishes.
- Under a binding nomination, your trustee legally has no say in where your super money goes as they have to pay it to either the dependents you have nominated, or your estate. These nominations only last for three years and are popular with the certainty they present.
- Alternatively, you may wish to create a ‘reversionary nomination’ for an income stream where you nominate someone to receive the super in continued pension payments. This acts as a contract between yourself and the super fund trustee and so will generally prevail over any binding nomination.
- Self-managed superannuation funds may also wish to incorporate wishes within the fund’s trust deed. In this situation, whoever owns control of your fund will determine how and to whom the money is paid. The person may also wish to have a binding nomination as well in this circumstance to provide additional assurance and it is important to assign control to a trustworthy person as they will have ultimate control of the fund.
Where someone does not nominate anyone, the decision will be made by the trustee of your super fund who will usually award the death benefit to one or more of your dependents on your estate. It is important to note there is no guarantee of this as the trustee will have the discretion to assign the benefit as they see fit in these circumstances which may cause difficulties.
In Summary
It is important to ensure any nomination you make is legally valid and you have decided an option for distributing your super based on your individual circumstances.
In the situation where someone is not part of a blended family and in a solid, stable relationship with amicable relations, they may not need a binding nomination. Then again, binding nominations provide certainty and clarity of the distribution of funds and prove to be particularly useful in blended families or specific wishes.
It is critical to update your superannuation plan every five years or earlier for a major family event and seek independent legal advice to ensure your assets and interests go to the correct person in a timely manner.
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