A common question that has most trustees scratching their head.

 

Upon the event of your death, unlike the rest of your personal belongings or assets your Will does not govern who your superannuation balance will be paid out to. It is only through a written notice an individual can indicate their preference as to how they wish for their benefits to be distributed in the event of their own death. 

This means that it may be a good idea for you to put a written nomination in place. With Binding or Non-Binding nominations on offer, it is important to know the difference. 

 

Binding Death Benefit Notice

A binding death nomination is a written notice given to the Trustee regarding the distribution of your benefits. With a valid notice in place, the trustee is legally obliged to follow the instructions provided on your nomination. 

You can choose to nominate a dependant or a legal personal representative. A dependant can be your spouse, child and anyone who is financially dependent on you. 

 

If you nominate your legal personal representative, then your super benefit will become part of your assets distribution as dictated by your Will.

 

Binding Notices can be changed or revoked at any time if the changes are submitted in writing, signed and dated by you and include a reference to your previous Notice. Your new notice will then have to be provided to the Trustee. 

 

Some funds also offer a choice between a lapsing and non-lapsing nomination. A non-lapsing nomination has no expiry date whereas a lapsing nomination is only valid for 3 years and is required to be renewed every 3 years. A Binding Notice will only cease to apply if replaced by a new Binding Notice or if you incorporate an expiry date. 

Some of the advantages of a Binding Death Benefit Nominations can include certainty over who will receive your superannuation benefit and removal of any trustee discretion. While some of the disadvantages are that not all superannuation funds offer Binding Notices and forgetting to update your nomination may result in the benefit being paid out to the wrong individual.  

 

Non-Binding Death Benefit Notice 

A non-binding nomination is a written notice indicating your preference as to how your benefit should be distributed on your death. This type of a nomination is more of a guideline you provide to your fund that they take into consideration when deciding who the benefit will be paid out to. The Trustee is not obligated to follow your wishes if they think there’s someone who’d be a more appropriate individual to receive the benefit. 

As Non-Binding Death Benefit Notices do not have an expiry date, this can be viewed as an advantage. The Trustee is also able to distribute any superannuation benefits given the member’s relationship at the time of death as well as considering the members’ wishes.  

However, with a Non-Binding Death Benefit Notice in place, there is no certainty of who will receive the superannuation benefits in the event of death, as ultimately it is the trustee’s discretion as to whom and how the benefit will be paid. 

 

We hope that this blog has given you a good understanding of the difference as well as some of the advantages and disadvantages that the Binding and Non-Binding nominations can offer. 

 

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