Superannuation balances are not directly held by you and therefore do not automatically form a part of your estate. The balances are held by your superfund trustee on your behalf, and they will deal with your superannuation on your death.
Binding Death Benefit Nominations [1]
A binding death benefit nomination (BDBN) is a written direction to the trustee of your superannuation fund that sets out the dependents and/or legal personal representative that you want to receive your benefit after you die. At the date of your death, where there is a valid BDBN, your superfund trustee must pay your benefits to the nominated beneficiaries in the proportions set out by you in the nomination.
Where a binding death benefit nomination has been made, then the trustee will pay the benefit to that nominated person/estate. If the nomination is non-binding, the trustee of the fund may consider but is not bound to pay the death benefits per the nomination and they will make their own enquiries as to the appropriate person to receive the benefit at the time of your death.
There are 2different kinds of BDBNs – lapsing and non-lapsing.
- A lapsing BDBN expires in 3 years from the date it is signed. The nomination is effected once accepted by the superfund trustee.
- A non-lapsing BDBN will not expire or lapse, unless you amend or revoke it.
Superannuation dependants
Under superannuation law, the only people who can receive your superannuation death benefit are Superannuation Dependants including the following:
1 Your spouse.
2 Your children.
3 Any person with whom you have an interdependency relationship.
4 Your legal personal representative (the executor of your Will, to distribute as part of your estate).
If, for example, you nominate your parents, siblings, or a friend to receive your superannuation death benefit and they are not in an interdependent relationship with you (the test to prove this relationship is stringent) then the nomination is not valid (despite the fact it has been received by the trustee of your superannuation fund). Upon your death, the trustee will disregard the invalid nomination and will choose which superannuation dependent/s to pay the benefit to. This could include a spouse you have only been in a relationship with for a short time, or a child who is estranged from you.
If you want to distribute your superannuation death benefit to someone who is not a superannuation dependent, then you should sign a nomination directing the trustee of the fund to pay it to your legal personal representative. That means your superannuation death benefit will be distributed as part of your estate.
When making a superannuation beneficiary nomination in Australia, you generally do not need to provide evidence of your relationship with the nominated beneficiary at the time of making the nomination. (e.g. you do not need to provide a copy of your marriage certificate, or evidence that you are in an interdependency relationship). The nomination will be tested following your death and may result in the nomination being invalid. As a result, your superannuation death benefit could be paid to people other than your intended beneficiaries.
[1] There are funds, such as CSS and PSS, that will pay your superannuation death benefit according to their policy and do not accept beneficiary nominations.