How To Make Sure Your Superannuation Goes To The Right People

By Nicholas Marouchak

16 November 2020 - 3 min read

how to make sure your superannuation goes to the right people

A common mistake people make with their superannuation is thinking that they can simply leave it to a person (or people) through their Will.

Generally speaking, super cannot be left to someone through a Will directly, but there are options.

You can control who gets your super through a nomination (more below).

Money that is leftover in a person’s super, plus any life insurance attached to it, is called a “death benefit”.

What options are available to Control Your Super?

Here are several options to help you ensure your super goes to the right person or people.

Super funds differ, so we recommend giving your fund a call to find out what options are available to you.

Binding Death Benefit Nomination

Binding Death Benefit Nomination (BDBN) is a legally enforceable direction for the super fund to pay the money as decided by you.

You can nominate either a “dependant” or your estate (if you have a Will, it’s paid to your executor to be divided under the terms of your Will).

This is the only way you can make sure that your super is left to the people of your choice, provided they are a dependant or are in your Will (if you choose your estate).

dependants include

  • your spouse (including your de facto partner),
  • children;
  • an “interdependant person” which means a person in a close personal relationship where there is financial support and personal care. This can include: children of de facto partners, dependant parents, adult children living with and caring for a parent or interdependant siblings living together.  Friends and flatmates do not count.

Most funds will also let you decide how the money will be paid out, for example, in a lump sum or in a pension.

Most will also allow you to divide the amount between multiple people, and give each person a percentage of the overall amount.

However, there are some disadvantages. BDBNs will only last for a maximum of three years, (or less depending on the fund) before they have to be renewed. If a BDBN has not been renewed before the death of the account owner, then it is not valid.

Also, if you have nominated more than one person, and one of the nominees dies before you, then entire BDBN becomes invalid and you will have to create a new one.

Non-binding Death Benefit Nominations

This gives the account holder the ability to nominate who they would like to receive money from their super. This type of nomination does not expire

However, the super fund is not legally bound to follow this direction. They simply have to take it into consideration when deciding who will receive the benefit.

When Nominations are not Available

Not all funds offer BDBNs or non-BDBNs. If it doesn’t, the Trustee of your super fund will decide who will receive the death benefit. There are laws in place to make sure the Trustee can only pay it to your dependants or your estate.

Nominating Your Estate

If you nominate your “estate” using a binding or non-binding death benefit nomination, then if you have a Will, your super will be divided pursuant to the terms of the Will (after the Trustee pays to your estate).

Remember you need to create a BDBN to force the Trustee to pay to your Estate.

Self-Managed Super Funds (SMSF)

If you have a SMSF, different rules apply, because the owner is also usually the trustee of the fund.

The law requires that SMSFs have at least two trustees or one corporate trustee.

If you manage your own super, you should look at the trust deed, which governs the fund, to make sure it allows BDBNs and non-BDBNs.