"I have nominated my beneficiaries for my superannuation, should anything happen, but I've been told there may be more to the process. How do I ensure payment goes to those I've nominated?"
- Question from Cathy in Rosewater, SA
Top answer provided by:
Shane Hatch
Hey Cathy,
Great question and thanks for asking it. As superannuation will often be one of our biggest assets, it’s great that you have already nominated beneficiaries, as a surprisingly large number of the population hasn’t.
It is important to have up to date beneficiaries on your superannuation. The super world can be very difficult to navigate so it’s always a great idea to ask for expert advice and your question is one we get daily, so I’m more than happy to give you some information about beneficiaries and super.
If there are no beneficiaries, in the event of death your super balance will be paid out to either the your dependants or to your estate. There are rules on who can be a beneficiary - eligible beneficiaries under superannuation law include:
-Your spouse or partner
-Your children (regardless of age)
-Anybody financially dependent on you when you pass away.
-Your estate or legal representative (known as an executor).
If for whatever reason you want to leave money to someone who does not meet the dependency requirements under law, you could name your executor and leave instructions in your will as to what must be done with your superannuation’s funds, and the executor must follow the instructions of the will.
There are two types of beneficiary nominations these are:
1. Binding – which means that it must be followed by the superannuation trustee, these come in two forms either lapsing or non-lapsing. Lapsing is the more common form for a binding nomination, this beneficiary type must be renominated, generally every three years (depending on the superannuation provider) or it will no longer be valid. Non-lapsing is less common but that means that it is only changed if you decide to.
2. Non-binding – are beneficiaries that the trustee is not legally obligated to pay, though the trustee will take it into account and use it as a guide on who to pay the amounts legally required to, this can cause a problem if the member is part of a mixed family or any other different situation, this can result in the funds being paid to the wrong beneficiaries or someone that the member wouldn’t have liked it going to.
As your main worry is to make sure that your nominated beneficiaries are going to get paid upon your death you need to make sure you use a binding nomination.
In summary Cathy, the most important thing to do is reach out to your super provider and see if your nomination is a binding or non-binding nomination. If it is a non-binding nomination I would strongly suggest that you change that to a binding nomination, though it is likely you will have to update it every three years, you will have peace of mind knowing that the trustee is bound by law to follow your wishes. If perhaps your nominated beneficiary doesn’t fall in the acceptable nomination criteria, then you must set your beneficiary nomination to an executor through your will where they will have to follow the instructions there to how you want your super distributed.
Hope this helps Cathy. I recommend contacting a financial adviser to review your estate planning goals and they could help tailor the advice specifically to your needs and wishes.
Kind regards,
Shane
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