Binding Death Benefit Nominations as part of Estate Planning

A Binding Death Benefit Nomination is used to direct payment of your superannuation fund after your passing. However, your super can only be paid to your dependant or legal personal representative.

If your intended recipient does not fit the definition of a “superannuation dependant”, you may wish to allocate your superannuation as part of your estate instead.

What is a Binding Death Benefit Nomination?

After a member’s passing, the balance of his/her superannuation fund becomes a super death benefit. Without a binding death benefit nomination in place, the trustee of the superannuation fund decides the payment of the super death benefit. This may not reflect your actual intentions!

Provided the superannuation fund trust deed permits, a binding death benefit nomination gives you the ability to direct the distribution of your death benefits in a particular way. This gives you and your intended beneficiaries a degree of certainty.

Who is a Superannuation Dependant?

You might find it surprising that the Superannuation Industry (Supervision) Act 1993 (Cth) has a narrow definition of who is considered a “dependant”. Below is a summary of accepted dependants:

 

Dependant Superannuation dependant
Spouse
Married Yes
De facto Yes
Former No
Same Sex Yes
Child (natural, step, ex-nuptial or adopted)
Under age 18 Yes
Over age 18 Yes
Financial dependant (full or partial) Yes
Interdependency Relationship Yes

Table 1: Breakdown of Recognised Superannuation Dependants

This definition may disadvantage younger, single and childless individuals because important family members (such as siblings, parents, and cousins) cannot become your nominee. You can only include them if there is proof of a degree of dependence, usually financial. For example, the payment of lodging to a mother – see Faull v Superannuation Complaints Tribunal [1999] NSWSC 1137. Or, the financial support of a close friend – see Noel v Cook [2004] FCA 479.

When Should I Nominate My Legal Personal Representative Instead?

When you want your superfund entitlements to go to a non-dependent, you should direct your super death benefit to your estate. You do this by nominating your legal personal representative in your Binding Death Benefit Nomination. You can then provide for the specific distribution of your super death benefit to non-dependants in your will. Additionally, if the intended recipient residuary becomes ineligible under your will, the super death benefit will become part of your estate instead, and will go to your residuary beneficiaries who may be people, or organisations, such as charities, who otherwise would not be entitled to a distribution from your superfund.

Need help optimizing your binding death benefit nomination? Take the first step in your estate planning. Contact Ezra Legal today for free preliminary information.

Lydia Ho

Solicitor

Ezra Legal

0

Like This