Should you make someone the binding, or non-binding beneficiary of your super when you die? It’s an important question, because your super is treated differently to other assets after your death.
Unlike the family home, shares and other investments, which can be distributed according to your will, the Trustee of your super fund decides who receives your super.
A binding or non-binding beneficiary nomination can help guide the Trustee and ensure your super is distributed according to your wishes.
Let’s explore the differences between the two options.
· Your super will go to the person you nominate as your beneficiary when you die. You can only nominate a person who is your dependant under superannuation law (your spouse, your child or a person you have an interdependency relationship with) or your legal personal representative (i.e. your estate).
· This means that it’s up to the Trustee of your superannuation account whether or not your super goes to your listed beneficiary.
Here are the pros and cons of each option.
You can direct who you want to receive your money (as long as they’re a dependant).
If your circumstances change, e.g. a divorce, you'll need to complete a new binding nomination form and resubmit it.
Can work well with overall estate plan for blended families, mixed families, extended families and second and subsequent marriages.
The Trustee is unable to use discretion as to who benefits are paid to, so if your circumstances have changed but you haven’t amended or revoked your binding nomination they can’t take your current relationships into account.
The decision is yours, not at the Trustee’s discretion.
Not offered by all super funds and it expires after three years unless you renew or amend it.
The Trustee is able to distribute super and pension proceeds given the member’s relationships at the time of death and taking into account the member’s wishes
No certainty of who will receive super and pension benefits
Ability to nominate any beneficiary
Whether you choose binding or non-binding nominations, there is no substitute for seeking the advice of your trusted advisors and regularly reviewing your affairs. You will need to keep your nominations up-to-date, especially if your situation changes, such as re-marriage, or having children. A surprising number of people nominate their parents as beneficiaries, then a decade or two later, realise that they now have their own family and therefore, new beneficiaries.
Whichever type of nomination you make, remember to review your nominated super beneficiaries regularly and update them according to your latest life developments. It’s also a good idea to review your will regularly.