The Importance of Binding Nominations
All too often we hear stories from clients and families who have been faced with significant conflict when a loved one or family member has passed away, conflict that could have been avoided had their loved one's financial affairs been in order and/or regularly updated and reviewed.
So how can we prevent this from happening?
- Seeking professional help to ensure that you have a valid will
- Updating and reviewing your super death benefit nomination (preferably on an annual basis)
There are so many elements to effective estate planning but in this article, we discuss the importance of having a binding nomination in place.
What many people do not know is that even with a valid will in place, when it comes to your super account, it's the trustee of your super fund who can decide who receives your super death benefits and the life insurances that may go with it.
To break it down, anyone that has Superannuation is likely to be familiar with the types of super death benefit nominations below:
- A non-binding nomination: This is where you tell the trustee of your super fund who you'd like your super benefits to go to, and while the trustee will consider this, it does not guarantee (or, it is not 'binding') that these benefits will go to who you intended. The trustee makes this decision and takes into account your personal circumstances. This can take some time and could mean that your intended beneficiaries may have to wait for months before they receive these benefits.
- A binding nomination: In this situation, the trustee must pay the super benefits to the nominated dependents that you have chosen. This death nomination must be made in writing, signed and dated by you and witnessed. Having a binding death nomination in place can mean a quicker process of paying out super death benefits. This can be beneficial if your beneficiaries need money to pay out mortgages, loans, etc. It's important to note that a binding nomination must be renewed every three years for it to remain valid. We recently had clients who separated and subsequently divorced, so we immediately changed their binding nominations to reflect their new circumstances. Another reason to update this is if you have a new addition to the family.
- A non-lapsing binding nomination: This option never expires unless you cancel or change it, which means that you do not need to update your death benefit nomination in writing every three years. It's important to review this regularly should your circumstances change and check with your super fund as not all funds offer this as an option.
We've simplified a rather complex topic and we would suggest that you seek the advice of a lawyer or financial adviser to ensure that you are making the right decisions when it comes to your own personal circumstances and estate planning. Your super fund will also be a great source of information.
References: Inergi (Financial Knowledge Centre)
Sound Life & Superannuation Agencies Pty Ltd ABN 009 253 258 trading as Sound Life Financial Services is a Corporate Authorised Representatives of Synchron, AFS Licence No. 243313.
The information contained in this article is general in nature and does not take into account your personal situation. You should not consider this to be advice and you should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
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