By Jodie Mason
Almost every person who has held a job in Australia will have superannuation. It can often be one’s principal (and sometimes,only) asset. Many people believe that their superannuation will form part of their estate to be distributed in accordance with their will. This however is not the case, and as such, special consideration needs to be given and certain procedures undertaken, to ensure that your superannuation is dealt with pursuant to your wishes.
1. Super normally does NOT form part of your estate
As your superannuation is held by your super company’s Trustee and not actually held by you, it does not
form part of your estate dealt with by your will. Upon death, it is the Trustee that has the decision, and discretion, on how to distribute the superannuation. The only instance in where superannuation will form part of your estate is where the nomination has been made out to the estate or the legal personal representative of the estate.
2. Binding v Non Binding Nominations
There are two types of superannuation beneficiary nominations. There is a binding nomination, which a Trustee is compelled to comply with, and a non-binding nomination, which a Trustee may elect at its discretion whether to act in accordance with.
A binding nomination is a written notice to the Trustee of the super fund which directs the Trustee how to distribute the superannuation entitlements upon the fund holder’s death and is only valid if:
a) it is in writing;
b) it is signed and dated by the fund holder in the presence of two witnesses (similar to a will);
c) contains a declaration by the two witnesses that the notice was signed and dated by the fund holder in their presence; and
d) is provided to the Trustee of the super fund.
A binding nomination can only electa dependant to be the beneficiary.
Superannuation law defines the word ‘dependant’ to include:
a) a spouse;
b) a child;
c) any person in an interdependency relationship (someone you share a close personal relationship with,
live with, or provide financial or domestic support to); or
d) any other person who the Trustee considers was dependant on you for maintenance or support at the
date of your death.
It is common for binding nominations to expire three (3) years after the execution date, making it essential that you carefully monitor your nominations and update as required.
A non-binding nomination acts as a guide for the Trustee in deciding how to pay the death benefit and superannuation entitlements. The Trustee has a responsibility to make sure benefits are distributed in an appropriate manner and generally can only make a distribution to a dependant. If the deceased left no
surviving dependants, the Trustee will then be able to make a distribution to a non-dependant, which in reality is a rare event.
3. Contesting a Trustee’s Decision
If you are unhappy with a Trustee’s decision, the first step is to notify the relevant super company. If the matter is not resolved to your satisfaction, you may appeal to the Superannuation Complaints Tribunal. The SCT is an alternative to the Court system and to access the SCT, you must have first made a direct complaint to the superannuation company. The complaint to the SCT must be made within 28 days of receiving a response from the super company.
To be eligible to make a complaint to the SCT, the person must have a direct or in-direct interest in the
death benefit and must also be a dependant or legal personal representative of the fund holder.
4. What Can You Do?
Many people would be uncomfortable with someone that does not know them, or their family, making a decision about who should receive a large portion of their assets. The best way to avoid this is to be fully aware of what you own and how you wish to distribute it upon your death. If you are a member of a managed fund, you should contact your superannuation company (or companies, if you have not amalgamated your funds) to determine the specific process the Trustee of your superannuation company requires to make a binding nomination or non-binding nomination. Remember to check how long the nomination is valid for, and make a reminder to yourself to update it upon expiration.
