Why is making a binding death benefit nomination important?

In short, it is possible to lose control over who benefits from your superannuation after your death if you do not have a binding death benefit nomination in place at the time of your death.

Here’s why:

1. Trustee Discretion: Without a binding death benefit nomination, the trustee of the superannuation fund is not required to observe the deceased’s wishes about who receives the death benefit payable as a consequence of their death. This means there is the potential for the Trustee’s discretion to come into play when deciding who to pay death benefits to and the outcome may not align with the deceased’s wishes.
2. Legal Challenges: The absence of a binding death benefit nomination can lead to disputes among potential beneficiaries, which can result in legal challenges and delay the distribution of death benefits.
3. Intestate Succession: If the deceased did not have a will or a binding death benefit nomination, the distribution of assets will follow the laws surrounding intestacy. These laws dictate which relatives are entitled to claim a deceased’s assets and is not a reflection of the deceased’s wishes surrounding his intended beneficiaries.
4. Tax Implications: The distribution of death benefits to different individuals can have different tax consequences. How much of the death benefits payable are taxed can sometimes be controlled by who is nominated. Without a nomination, there is no control over the potential for beneficiaries to be taxed and an unnecessary reduction in the overall benefit to beneficiaries could be the result.
5. Administrative Delays: The process the Superannuation Fund follows to determine who is the rightful beneficiaries can take substantially longer without a binding death benefit nomination, causing delays in the distribution of death benefits to beneficiaries and increasing the likelihood of conflict where there are competing claims.

To avoid these issues, it’s advisable to regularly update and maintain a binding death benefit nomination with your superannuation fund and ensure your will is up to date. Wills and death benefit nominations should work together to achieve the overall desired outcome. Consulting with an experienced estate planning lawyer can provide further guidance tailored to your specific situation. Need advice? Reach out to our caring and experienced estate planning lawyers today.

ID 39672052 © Richair | Dreamstime.com