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Trustees of superannuation funds have usually had a discretion in respect of payment of death benefits. You could nominate beneficiaries to receive the death benefits payable from your fund, but the trustees were not bound to comply. In practice they usually did comply, but there was no legal obligation to do so. Now, the Superannuation Industry (Supervision) Act and the Superannuation Industry (Supervision) Regulations have been amended to permit funds (but not self-managed funds) to offer the facility of a "binding nomination", which will compel the trustees to distribute the death benefit to the persons nominated.
A binding nomination will only be valid if -
- the persons nominated are dependants or the legal personal representatives (executors) of the fund member;
- where more than one person is nominated, the member has specified the proportion to be paid to each;
- it is in writing, signed and dated by the member and witnessed by two adults not nominated as beneficiaries;
- it has been made or updated at least every three years;
- a beneficiary nominated as a dependant is a dependant at the death of the fund member.
If the binding nomination is made in favour of the member's executors, the death benefit will be paid to the estate and distributed in accordance with the will. It will therefore be important to consider the financial and legal implications of a binding nomination. You should seek further information from the trustees of your superannuation fund and advice from your financial adviser as to the financial and taxation implications. You should also ensure that you have a valid and up-to-date will which is designed to complement your superannuation arrangements.