The importance of a Nominated Beneficiary.
When you think of your financial life, most of us are focused on the accumulation of wealth and the protection of wealth. But it is what happens to that wealth when we die that we can often neglect.
A common financial goal is “To provide for my family.” That may be an investment or an insurance policy. But when you pass, how do those funds pass? Having all the funding in place would mean nothing if it doesn’t pass to who we intended.
There are many elements to Estate Planning, too many to address in one article. In this article, we will address Superannuation Binding Death Nominations, where and why they are critical to a complete Financial Plan.
Your Superannuation is held in trust. The legal owner of those funds is the fund Trustee. When you pass, your superannuation will not be a part of your Estate Assets. Therefore your superannuation will not be distributed in line with your will.
The Trustee has the discretion to pay a death benefit in accordance with the trust deed and relevant laws. In the majority of circumstances, there is no issue. With the surviving spouse or financial dependants receiving the benefit. However, there are instances where it may not be as clear-cut. Second (or third) marriages (yourself or your children) estranged children or even a live-in relative all can muddy the waters.
There is only one way to make sure your superannuation passes to those you intend is to make a nomination. By making a nomination to the trustee, you can make a direction on how to pay your death benefit. There are two types of nominations, a Non-Binding Death Nomination and a Binding Death Nomination.
Non Binding Death Nomination
A Non-Binding Death Nomination will give the trustee a ‘guidance’ as to how you want your superannuation death benefit distributed. However the trustee still has ultimate discretion. These nominations will not lapse until you revoke them or make a new one.
Binding Death Nomination
Binding Death Nomination is a legally binding nomination that the trustee has to follow in the event of your death.
In order to be binding, there are certain criteria that need to be met:
- The nominated person must be a dependant under superannuation law. This could be a spouse, a child, a financial dependant, anyone with an ‘interdependancy’ relationship or a legal personal representative.
- Must be made in writing, with the percentage of the benefit for each person nominated. It also must specify the type of payment.
- Signed by the member in the presence of two witnesses. The witnesses must be over 18 and not beneficiaries. The witnesses must also sign a Witness Declaration.
- The nomination must be received by the trustee.
One last important element is that the nomination is generally only valid for 3 years. At which time you will have to make a new nomination. You are able to change your nomination at any time. Recently some funds have introduced Non-Lapsing Binding Death Nominations.
Death is inevitable and a very trying time for those we leave behind. The last thing we want is financial uncertainty for our loved ones. Especially when we have worked so hard to provide it for them. A quick review of your superannuation will give you the peace of mind that your assets will pass as they should.
Speak to a professional, Schedule a no-cost, no-obligation Discovery Meeting with Louella Jorge to ensure your wishes will be met when your time has come.
Discovery Wealth Advisers – The Hills trusted name in financial advice. The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. Louella Jorge is an Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429. This editorial does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information, you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser before you act.