Most Australians are surprised to learn that their superannuation doesn’t automatically form part of their estate, which means it may not be covered by their will.
Instead, your super fund will decide where your super (and any life insurance held within it) goes when you pass away, unless you’ve made a binding beneficiary nomination.
It’s a detail that’s often overlooked, but it can have major consequences for your loved ones, especially during an already difficult time.
Here’s what you need to know to avoid common mistakes and make sure your super goes where you want it to.
Why your super isn’t covered by your will.
Superannuation is held in trust by your super fund, and it’s legally separate from the rest of your estate. That means even if you’ve included instructions in your will, your super fund isn’t required to follow them unless you’ve taken the right steps.
In most cases, your fund will look at your beneficiary nomination if you’ve made one, or decide based on who they consider to be your most deserving dependants.
This is where things can get complicated, especially in blended families or if your wishes aren’t clear.
Binding vs non-binding nominations
When it comes to nominating a beneficiary, there are two main types of nominations:
- Non-binding nominations are more like a suggestion or statement of wishes. Your super fund will take your non-binding nomination into account but ultimately has the discretion to decide who receives your super.
- Binding nominations are formal and legally enforceable. Your super fund must pay your benefit according to your instructions, as long as the nomination is valid and up to date.
Some super funds now allow you to make a non-lapsing, binding nominatio,n meaning it stays in place unless you change or cancel it. Otherwise, most binding nominations expire after three years and need to be renewed.
Choosing the right nomination can make a huge difference to whether your wishes are followed.
Who you can (and can’t) nominate.
You can’t leave your super to just anyone; your nomination must follow specific rules.
Eligible beneficiaries include:
- Your spouse or de facto partner
- Your children (including adult children)
- A person financially dependent on you
- A person you are in an interdependent relationship with
- Your legal personal representative (the executor of your estate)
You cannot nominate friends, siblings, parents or grandchildren (unless they’re financially dependent), or charities directly, so if you want such persons to benefit from your super, then you need to nominate your legal personal representative, and then provide for a gift of super to your desired beneficiaries in your will.
Nominating someone ineligible is one of the most common reasons a nomination is rejected.
How to keep your nomination valid.
Even if you’ve made a nomination, it’s not always set-and-forget. Here are a few things to watch out for:
- Check the expiry date: Most binding nominations expire after three years unless you’ve chosen a non-lapsing option.
- Update after major life changes: Getting married, divorced, or having children can change who you want to nominate.
- Make sure the person is still eligible: For example, an ex-partner may no longer meet the definition of a dependant.
- Use the correct form and submit it properly: Each fund has its own process. If the form is incomplete, unsigned or not properly witnessed, it is likely to be rejected.
Reviewing your nomination regularly can help avoid confusion and unintended outcomes down the track.
Estate planning with peace of mind.
At APS, we know that estate planning is about more than just writing a will. It’s about making sure every part of your financial life, including your super, is set up to support the people who matter most to you.
Our friendly legal team can help you:
- Understand who you can nominate
- Make or review a binding nomination
- Coordinate your nomination with your broader estate plan
- Liaise with your financial planner to coordinate your nomination with your broader financial plan
- Avoid the common traps that catch people out
We’re here to help you feel confident that your affairs are in order and that your wishes will be carried out the way you intended.
Get in touch with our team today to speak with one of our estate planning or financial advice specialists.
Written by APS Wills & Estates Principal Lawyer Phillip Lambourne
Phil is a lawyer with over 35 years of experience in private practice and over 25 years of experience in the trusts and estate planning area. As Principal Lawyer with APS Wills & Estates, Phil provides advice and prepares documentation in the areas of Wills, Powers of Attorney, Probate and Estate Administration for clients across Australia. He also provides clients with conveyancing and property law, commercial law and state tax advice services.
When Phil isn’t working, he enjoys spending time with family, reading new books, and watching new shows with some good scotch whisky, red wine and cheese. Phil also enjoys playing trombone in the Melbourne Lawyers Big Band!