Nominating a beneficiary lets you have your say about who receives your super and any death insurance you may have if you pass away. (Together, your super and death insurance payment (where eligible) are known as a ‘benefit’, which is how we’ll talk about it here.)
This is what you need to know to get your beneficiaries sorted.
There are rules around who can receive your benefit, which means your choice of beneficiary is limited to one or more dependants and/or your legal personal representative, who might be either the executor of your will or the administrator of your estate.
When we refer to your dependants, we mean your spouse, child (of any age), someone who is financially dependent on you, or any person you have an interdependency relationship with. Your spouse doesn’t just mean husband or wife – it includes a person with whom you live in a genuine domestic relationship of the same or opposite sex.
AN INTERDEPENDENCY RELATIONSHIP
There are four conditions that must generally be met to qualify for an interdependency relationship:
- You have a close personal relationship, and
- You live together, and
- One or each of you provides the other with financial support, and
- One or each of you provides the other with domestic support and personal care.
Also, there are exceptions. For example, if one or both of you suffer from a physical, intellectual or psychiatric disability and you have a close personal relationship but don’t live together, you may be classed as having an interdependency relationship.
These rules apply to both binding and non-binding nominations. Note that different tax treatment can apply for different types of beneficiary.
Let’s look at the pros and cons of nomination choices.
This type of nomination acts as a guide only, as we’re bound by superannuation and trust law when making a decision. We’ll consider your nomination, but there’s a chance your super and any insurance benefit could end up going to someone other than your preferred nominee/s.
For example, if we believe you have dependants with greater needs than those you’ve nominated, we could decide to pay them your benefit. Or we could change the percentage to what we consider to be appropriate (in line with our legal obligations).
A non-binding nomination doesn’t expire, so if you change your mind for any reason, you’ll need to change your nomination too. In this case, the onus is on us to find out who was dependent on you at the time of your death and decide how to pay out your benefit.
A binding nomination limits surprises. As long as it's valid at the time of your death, your super fund has to do exactly what it says.
There’s a bit more paperwork involved as you’ll need to complete the Binding beneficiary nomination form and have it witnessed.
There are two types of binding nominations you can make: lapsing or non-lapsing. The main difference is how long they’re valid for.
- A lapsing binding nomination is only valid for three years (from the date you sign and date the form). This might seem frustrating if your beneficiaries stay the same but could be a blessing in disguise if your circumstances change. If you change your mind at any time, you’ll need to fill out a new form to update us.
- A non-lapsing binding nomination doesn’t expire unless you cancel or update your nomination. But there are circumstances where it could become invalid. For example, if you get married.
No matter which binding nomination you choose, you should keep it up to date when your circumstances change. In both cases if you nominate your dependants they must still be your dependants at the date of death. Your nomination will also be invalid if anyone you nominate dies before you.
IF YOU DON’T MAKE A NOMINATION
If you don’t choose a beneficiary, we’ll decide who receives your death benefit in accordance with superannuation and trust law. We’ll investigate if you have any dependants and make a decision based on who we determine has the greatest needs.
IF YOU NEED HELP
Not sure why you’d make one type of beneficiary nomination over the other? We can help you understand how it works and who you can nominate, so you can make the best choice for your circumstances.
To speak to a financial planner, call us on 1300 360 149. This sort of advice is covered by your membership and won’t cost any extra.