Why Nominating Your Super Beneficiaries is Essential for Your Financial Plan
You work hard to build your superannuation, but have you considered what will happen to your super if you pass away before accessing it? While it may be uncomfortable to think about, planning for this eventuality is a crucial part of your financial strategy.
Unlike assets such as your home, car, or bank accounts, your super doesn’t automatically become part of your estate. Instead, it follows a different path determined by either your explicit instructions or the decisions of your super fund’s trustees.
Choosing Your Beneficiary
In most cases, upon your death, your super fund will pay out your super to your nominated beneficiary. You can nominate your dependants or legal personal representative (LPR). A dependant can include:
- Your spouse or de facto partner
- Your children (including adopted children, stepchildren, and your spouse’s children)
- Someone financially dependent on you
- Someone in an interdependent relationship with you – someone with whom you share a close personal bond, live together, and provide mutual support and care
If you choose your LPR as your beneficiary, they will manage your super according to your will. Keep in mind that it’s important to seek tax advice when choosing different beneficiaries. For instance, adult children may not receive your super tax-free, while a spouse typically will.
Making Your Wishes Known
To ensure your super is distributed according to your wishes, you need to make a clear nomination with your super fund. There are two main types of nominations:
- Binding Death Benefit Nomination (BDBN)
A valid BDBN must be in writing and witnessed by two adults who are not beneficiaries. BDBNs typically need to be renewed every three years. Once you submit a BDBN to your fund, you can confirm, amend, or revoke it by completing the necessary formalities. You can nominate your dependants or your LPR. If you nominate your LPR, ensure you maintain a valid will. - Non-Binding Nomination
A non-binding nomination serves as a guide to the trustee, who will make the final decision after assessing your circumstances. While this type of nomination doesn’t guarantee the distribution of your super as you’d like, it does offer some direction to the trustee.
It’s important to ensure that your nominated beneficiary is eligible to receive your super death benefit. For example, if you’re single and have no children, you can’t just nominate your parents, siblings, or friends, as they generally won’t qualify as your dependants.
If you’re unsure about who you can nominate, reach out to your super fund, financial planner, or estate planner for guidance.
The Importance of Regularly Reviewing Your Nomination
Major life events – such as marriage, divorce, the birth of children, or the death of a nominated beneficiary – should prompt you to review your super nomination. An outdated nomination might not reflect your current wishes, and updating it can help ensure that your super will go to the people you care about most.
By seeking professional financial and estate planning advice, you can have peace of mind knowing that your hard-earned super is being directed to your intended beneficiaries
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.