Binding Death Benefit Nomination: Who Gets Your Super When You Die

Your super does not automatically go to the people named in your will. The money in a super account is not automatically part of your estate, so your fund pays it out under its own rules and any nomination you have made with the fund. A binding death benefit nomination is the way to tell the fund who must be paid, as long as the people you name are eligible and the nomination meets your fund’s rules and the law.

Claim Done drafts a Binding Death Benefit Nomination from your answers for a flat A$49. You download it straight away, sign it in front of witnesses and give it to your fund yourself. Your fund may have its own nomination form, so the document tells you to check that first and, if your fund needs its own form, to use the draft as a record of your choices to copy onto it.

What happens to your super when you die

According to the Australian Taxation Office, in most cases the fund pays your remaining super and any insurance inside it as a super death benefit to your nominated beneficiary. Moneysmart says the money in your super account does not automatically form part of your estate, and that if you do not make a nomination, your fund may decide who gets the money, which might not match what you would have chosen.

The ATO’s super health check makes the same point: a death benefit nomination is not covered by your will. Where there is no nomination, the fund follows the law, which usually means paying one or more of your dependants or your legal personal representative (the executor of your estate).

Binding and non-binding, lapsing and non-lapsing

Not every fund offers every type. Moneysmart describes them this way:

The ATO says that with a non-binding nomination, or none at all, the trustee may use its discretion to decide which dependant or dependants to pay, and may also pay your legal personal representative to be distributed under your will. Moneysmart adds that a binding nomination that is no longer valid is normally treated the same way as a non-binding one.

The 3-year limit comes from the law for regulated funds. Under regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994, unless revoked sooner, a binding notice stops having effect 3 years after it was first signed, or last confirmed or amended, or at the end of a shorter period if the fund’s rules set one. The ATO’s health check notes that some funds offer nominations that do not expire and stay in place until revoked. Which kind you can make depends on your fund.

Who you can nominate

There are limits on who can receive your super, whatever type of nomination you make. Moneysmart lists the people a fund is allowed to pay:

• your current spouse or partner
• your children, of any age
• someone in an interdependency relationship with you when you die
• anyone financially dependent on you when you die
• your legal personal representative (your estate).

The ATO explains that an interdependency relationship exists when two people have a close personal relationship, live together, one or both gives the other financial support, and one or both gives the other domestic support and personal care.

If you want someone who is not a dependant under super law to benefit, the ATO suggests asking your fund about a binding nomination to your legal personal representative, so your super is distributed according to your will. Naming an ineligible person directly does not work: for self-managed funds, the ATO’s determination SMSFD 2008/3 says a nomination is not binding on the trustee to the extent that it names a person who cannot receive a benefit under the operating standards. If that is your plan, keep your will up to date as well. Moneysmart says to do exactly that.

Signing and witnessing

For regulated funds, regulation 6.17A says the notice must be in writing, and must be signed and dated by the member in the presence of 2 witnesses. Each witness must have turned 18 and neither can be a person named in the notice. The notice must also include a declaration, signed and dated by the witnesses, that the member signed it in their presence.

Self-managed super funds are different. The ATO’s view in SMSFD 2008/3 is that regulation 6.17A does not apply to them, and that an SMSF’s governing rules may allow binding nominations whether or not they follow that regulation. For an SMSF, the trust deed sets the requirements. The ATO’s page on the death of an SMSF member says the fund’s trust deed must be followed, even if it is different to the member’s will.

Whatever your fund, read its form or deed and follow its signing and witnessing rules exactly. Moneysmart warns that mistakes can make a nomination not valid.

Use your own fund’s form and rules

Moneysmart’s steps are practical. Check with your fund that you can make a nomination and which types it allows. Check how it must be done, whether online or on a form. Make sure the people you name are eligible. Read the fund’s information about when a nomination might become invalid, because each fund can have its own rules on that.

This matters for the document you use. If your fund has its own binding nomination form, use it. A nomination binds your fund only if your fund’s rules and the law are met, so never assume a nomination is valid until your fund has it and you have checked it against those rules.

How the nomination document is set out

The Claim Done document follows this structure:

1. Heading and parties: your full name as the member, the fund name and your member number if you have one, addressed to the trustee.
2. Purpose: a short statement that super is held by the trustee and does not pass under your will, and that you are making a binding nomination.
3. Beneficiaries: each person by full name, their relationship to you, and their percentage share, totalling 100%. Your estate (legal personal representative) can take some or all of it. A note appears if someone you named may not be an eligible beneficiary, or if the shares do not add up.
4. Lapsing or non-lapsing: worded to match your choice, with a reminder to confirm with your fund if you choose lapsing or are not sure.
5. Binding declaration: your direction to the trustee to pay in the stated shares, to the extent the nomination is valid under the fund’s rules and the law.
6. Fund note: for an SMSF, a reminder to check the trust deed; for other funds, a reminder to use the fund’s own form if it requires one.
7. Signing: a signature and date block for you, and two witness blocks, each with a name, signature, date and a declaration that you signed in their presence.

Keeping it up to date

Moneysmart suggests reviewing your nomination regularly and updating it when your circumstances or wishes change, and says your annual statement is a good reminder. If your nomination lapses, set a calendar reminder before it expires.

Mistakes to avoid

• Assuming your will covers your super.
• Naming someone who is not an eligible beneficiary, instead of your estate.
• Using a witness who is named in the nomination, or who is under 18.
• Shares that do not add up to 100%.
• Letting a lapsing nomination expire.
• Not giving the signed nomination to your fund, or not checking that the fund accepted it.

The tax treatment of a death benefit can be complex, and whether a particular nomination suits you depends on your circumstances, so you may want financial or legal advice before you sign. When you are ready to set out your choices clearly, start your Binding Death Benefit Nomination for A$49.