Deciding who should receive your super is an important part of planning for the future. A beneficiary nomination can provide clarity and reduce uncertainty for your loved ones. Here’s how nominations work and what to consider when putting one in place.
Why beneficiary nominations matter
Your super is often one of your largest assets, but it isn’t automatically covered by your Will. Without a valid nomination, the trustee of your super fund may decide who receives your benefit, which might not align with your wishes.
Having a nomination gives you more control and peace of mind that your super will be distributed according to your intentions.
What happens to your super when you die
Superannuation is treated differently from many other assets. Legislation restricts who the trustee can pay your death benefit to. Generally, it can be paid:
- To your estate, where it’s distributed according to your Will, or
- Directly to your eligible dependants, such as a spouse, child, financial dependant, or someone with whom you share an interdependent relationship.
You can make certain types of nominations that either bind or guide the trustee’s decision. The specific types of nominations available may vary depending on your super fund.
Beneficiary nomination options
Generally, super funds may offer three types of nominations:
Binding nomination – If valid, the trustee must follow your instructions.
- Lapsing binding nominations expire after three years unless renewed.
- Non-lapsing binding nominations remain in place until you update or revoke them.
Non-binding nomination – The trustee will consider your wishes but retains discretion when determining who receives the benefit.
Reversionary nomination – Available when you’re receiving your super as an income stream (pension). It allows payments to continue to an eligible beneficiary after your death.
The most appropriate nomination type will vary depending on your circumstances, who you intend to provide for, and how your super fits within your wider estate planning arrangements.
Estate vs direct beneficiary payments
Choosing between paying your super to your estate or directly to beneficiaries can make a big difference to how your benefits are managed.
Nominating your estate allows the funds to be distributed through your Will. This may suit you if you wish to direct the money to someone who can’t receive super directly or if you plan to use a testamentary trust for tax and asset protection purposes.
A direct nomination may reduce delays and help avoid disputes, as it can ensure your benefit goes straight to the intended recipients.
Remember, Wills can be contested, so direct nominations may provide more certainty.
Keeping your nomination up to date
Life events such as marriage, divorce, the birth of a child, becoming a step parent or death of a dependant can all affect your estate planning goals. Review your nominations regularly to ensure they continue to reflect your wishes.
Seek professional advice
A financial adviser can explain your nomination options; help determine who may be eligible to receive your benefit and review your arrangements over time.
Australian Mutual Bank has partnered up with Bridges, one of Australia’s largest financial planning companies, to offer you professional financial advice. Visit our Financial Planning page to find out more.
The information in this article is general in nature and does not take into account your personal objectives, financial situation, or needs. You should consider the appropriateness of the information for your circumstances and seek professional advice before making any financial or investment decisions. Superannuation and tax laws are subject to change, and outcomes may vary depending on individual circumstances.
