In the Mandie Case¹ the Federal Court held that “superannuation is not an asset of the estate and a trustee is not bound to follow the directions of a will. Even if superannuation is specifically mentioned in a will, it does not make it an asset subject to the terms of the will.”
Unlike an estate asset, upon death the balance of a superannuation account does not automatically flow to the estate of the deceased. Rather, the trustee of the superannuation fund will normally pay a death benefit in accordance with the governing rules of the fund and relevant law. That is unless there is a binding death nomination.
A binding death benefit nomination is a legally binding nomination which allows you to elect who is to receive your superannuation benefit in the event of your death. There are a few legal requirements in order for a nomination to be validly binding, including that only ‘dependants’ be nominated. For the purposes of superannuation law, a dependent includes a spouse, any person(s) financially dependent on the member or in an interdependency relationship with the member, or a legal personal representative (LPR).
There are a number of reasons to consider including a binding death nomination in your superannuation.
1. Certainty & Clarity
One of the obvious advantages of a binding death benefit nomination is the degree of certainty, control and clarity provided to the superannuation holder. You are able to distinguish precisely who will receive your benefit upon your death and if you have nominated more than one person you can allocate proportions (generally in percentage form) to each beneficiary. This prevents the fear of the “what if” that would otherwise exist if the future of your benefit was left to the discretion of a trustee.
2. Reduced litigation risk
In addition to the added certainty and clarity brought about by a binding death benefit nomination, there is also less risk of litigation or any form of legal dispute over any benefit arising from your death. This is particularly the case if you have past marriages or complex family matters where there may be multiple claims made. A legally valid binding death benefit nomination will significantly reduce any room for legal disputes in relation to your benefit and as such save your beneficiaries’ time, money and stress.
3. Expediency & efficiency
The ease and speed with which a death benefit can be paid can be significantly improved with a binding death benefit nomination. For reasons similar to those mentioned above, the clear-cut nature of a binding death benefit makes for a more timely distribution of your assets without having to wait for a trustee to make discretionary determinations or for any legal disputes to ensue due to ambiguity or subjectivity around beneficiaries and beneficiary amounts.
Setting up a binding benefit nomination is easy to do and does not take long. As part of our financial health snapshots at Wealth Depot, we review your binding death benefit nomination and advise when it is due to expire. We also advise you if it is apparent you do not have an active binding dead benefit nomination. However, if at any time you would like to update your binding death benefit nomination information please get in touch and we will help you out.
¹Stock (as Executor of the Will of Mandie, Deceased) v N.M. Superannuation Proprietary Limited [2015] FCA 612
