When you take out Superannuation you may be asked to make a ‘Binding Death Nomination’. This has the effect that when you die your Superannuation benefit is provided to a Beneficiary of your choosing.
It is important to note that this benefit does not automatically fall into your estate and on your death, the Trustee of the Superfund will pay any benefit due to the Beneficiary you nominated (provided they fall into the legislated category of ‘Dependents’… there are special rules relating to who is a Dependant). The Trustee does not need to wait for Probate to be granted and will immediately make the payment upon your death. This may be advantageous for married couples as it may provide a much-needed source of income to your spouse whilst waiting for the estate to be dealt with.
You should also be aware that for many funds, a Binding Death Nomination has to be renewed every 3 years as the notice ceases to have effect 3 years (or a shorter period as determined by the governing rules of the fund) after the nomination was ﬁrst signed. It is important therefore to keep your Binding Death Nomination updated.
If the Binding Death Nomination has expired, it is the decision of your Trustee whether to pay the benefit to the last person nominated or to pay it to your estate. In the event that it is paid to your estate, your Beneficiaries will need to wait until Probate has been granted before any death benefit can be distributed with the remainder of your assets.
It is also important for you to note that not every person is entitled to be listed as your Beneficiary for the purposes of your superfund. The Trustee is only permitted to pay any death benefit to a spouse, your children, any person financially dependent on you and any person you were having an interdependent relationship with at the time of your death (i.e. any person that lived with you and supported you or received support from you). If you wish your superfund to be provided to a friend, or anyone outside this category, you must instruct your superfund to pay any benefit to your estate and you must draft a Will, naming that person as a Beneficiary.