What happens to your super when you die?
What happens to your super when you die is a common question. Most of us are keen to ensure that we don’t leave behind a legal mess for our loved ones to untangle.
Or even worse, have our money left to those we don’t care about.
After equity in the family home, superannuation is the second largest ‘bucket’ of wealth for the majority of retirees. For this reason, it is important to make sure that your wishes are correctly recorded should you die. If your wishes aren’t correctly documented your super can be distributed at the discretion of the fund’s trustees, and that might bear no resemblance to what you wanted. One way of preventing that is through a Binding Death Benefit Nomination (BDBN). Today we explain how these binding nominations work work and why you need to check if your wishes will be followed.
What is a Binding Death Benefit Nominations?
Put simply a binding death benefit nomination is a written and legally binding nomination that instructs your super fund how to pay your death benefit should you die. A super fund trustee is legally bound to follow this nomination.
How can you make a BDBN?
Broadly speaking, you can complete the paperwork provided by your super fund or you can use a lawyer to help you make this nomination.
Says lawyer, *Rod Cunich, ‘Completing the paperwork is simple. Deceptively simple. But it remains dangerous not to seek advice from an expert. Some people, and even their non-expert advisers (including many financial advisers, accountants and lawyers), often get it wrong.’
How can things go wrong?
Here are a few of the common mistakes which can be made in the process of making a Binding Death Benefit Nomination:
- Binding nominations are usually valid for a maximum of 3 years. Many people think they are set and forget and don’t renew them.
- You need to use a form that is approved by your super fund. If you don’t, your nomination will be ineffective. You can usually download the form from your fund’s website or get one sent to you. Using the correct form for your fund is essential.
- If the form is not executed exactly in accordance with the rules of your super fund (for instance, not having the correct number of witnesses) this can make the form ineffective.
- If you fail to leave 100% of your death benefit, this can be fatal to the whole nomination. This sometimes occurs where the form is confusing (unfortunately some of the common templates are).
Other types of nominations
Other types of nominations include:
- reversionary beneficiary nominations – this applies if you have a superannuation income stream and means the payments can continue to be paid to your beneficiary
- non-binding death benefit nominations and
- non-lapsing binding death benefit nominations.
There are subtle differences between all of the above. One form of nomination may be far superior to another in your particular situation. For this reason, it is important to seek legal advice when making decisions which could affect any aspect of your legacy.
Regardless of your age or stage, it is critical to consider to whom you wish to leave your superannuation savings. If you do not complete a death benefit nomination, then the trustee of your fund has the ability to decide who will receive this death benefit. This means it may go to your estate. Or the trustee may decide which eligible beneficiaries will get these funds. Research undertaken by the National Seniors Association and wealth manager, Challenger, shows that one in four retirees dies without having touched their super. If this is you, there could be a lot at stake.
While we are not lawyers and can’t advise you on how and where to leave your super in the event of your death, we can help you to understand and assess your options for using your super in retirement.
You can find out more or book a consultation below.
*Rod Cunich email@example.com has more than 40 years’ experience in consumer and business law, and specialises in wealth protection, business succession and personal estate planning.