A Binding Death Benefit Nomination (BDBN) is a written instruction provided by a super fund member (i.e. you) to the trustee of the fund, specifying who should receive your superannuation benefits upon your death. It allows you, the member, to direct the trustee on how to distribute your superannuation death benefits and ensures that your wishes are carried out.
These superannuation death benefits can include the balance of your superannuation account and any life insurance proceeds attached to your superannuation.
Why is it important?
The importance of a Binding Death Benefit Nomination stems from the fact that superannuation death benefits are not automatically considered part of a person’s estate.
Instead, they are held in a trust structure by the super fund. When a person passes away, the trustee of the super fund typically has discretion in deciding how to distribute the benefits, considering factors such as financial dependents, legal requirements, and the deceased member’s intentions.
In other words, your super company will determine who receives your super, not you!
What are the benefits?
By making a Binding Death Benefit Nomination, a super fund member can provide clear instructions to the trustee, specifying who should receive their superannuation benefits and in what proportions. This can help ensure that the member’s intended beneficiaries, such as their spouse, children, or other dependents, receive the benefits as desired.
It provides certainty and can help prevent disputes or challenges regarding the distribution of the superannuation benefits after your death.
Who can receive a person’s superannuation?
Upon death, a person’s superannuation death benefits can be paid to one or more of your dependents (i.e. your spouse or children), or to your legal personal representative (for distribution in accordance with your Will).
- Dependant: For the purpose of the superannuation law, ‘dependant’ includes:
- Spouse or de facto partner
- Child (including step-children or adopted children)
- A person in an interdependency relationship with the deceased; or
- Legal personal representative: If the deceased person did not have any dependents or if there are remaining benefits after the dependents have been paid, the superannuation death benefits may be paid to the deceased person’s legal personal representative (executor). The executor then distributes the benefit according to the terms of the person’s Will.
Can Binding Death Benefit Nominations expire?
It is important to note that Binding Death Benefit Nominations typically have an expiration period, which is usually three years. It means that the member needs to review and update the nomination periodically to ensure its validity.
It is possible to put in place a non-lapsing binding death benefit nomination which means it only needs to be completed once, however, as this type of nomination does not expire, there are risks where a person’s circumstances changes.
Death benefit nominations should be reviewed regularly to accommodate for changes in your circumstances, or those of a nominated beneficiary, that could make the nomination no longer appropriate.
What happens if I don’t have a Binding Death Benefit Nomination?
If you do not have a binding death benefit nomination with your superannuation fund, the trustee of the fund will have discretion to determine how your death benefits are distributed. The trustee will typically consider your circumstances and the people who are financially dependent on you or have a valid claim to your superannuation benefits.
Having a binding death benefit nomination allows you to specify exactly how you want your death benefits to be distributed, providing more certainty and control over the outcome.
How do I put a Binding Death Benefit Nomination in place?
For industry and retail superannuation funds, binding death benefit nomination forms should be available on their website, or by contacting them.
To be valid, the nomination must be made in favour of one or more superannuation dependants, a person’s legal personal representative or a combination of them. It must be in writing and signed by the member and two witnesses over the age of 18 who are not a nominated beneficiary.
For self-managed superannuation funds, the trust deed must allow for the making of binding death benefit nominations and the nomination must follow the rules set out in the trust deed.
To find out more about binding death benefit nominations, or to seek assistance to ensure that a valid nomination is put in place, talk to our team today. The above is general in nature and does not constitute legal advice.
