A Comprehensive Guide to Superannuation Beneficiary Nominations
Superannuation beneficiary nominations are crucial in estate planning. Your choice of nomination can significantly affect how your benefits are distributed after your death. This guide will explore the options, opportunities, and challenges associated with superannuation beneficiary nominations. Our aim is to help you ensure your wishes are effectively carried out.
Overview of Nomination Types
Superannuation funds offer several types of death benefit nominations:
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Binding Death Benefit Nominations
Lapsing: These must be renewed every three years. They provide certainty by directing the trustee to pay benefits to specific beneficiaries. NonLapsing: These do not expire and provide enduring certainty. They remain in force until you change them. -
Non-Binding Death Benefit Nominations
These act as an expression of your wishes rather than a binding directive. Trustees retain discretion but consider your nomination when making decisions. -
Reversionary Beneficiaries
Applicable to pensions, this allows the pension to continue to a nominated dependant after your death. -
No Nomination
If you make no nomination, trustees rely on the funds trust deed to determine beneficiaries or pay the benefit to your estate. -
MemberDirected Nominations for SMSFs
Self-Managed Super Funds SMSFs allow members to nominate beneficiaries with more flexibility, subject to the trust deed.
Key Considerations
Binding Nominations
Lapsing Binding Nominations: Must be renewed every three years. They require written, signed, and witnessed declarations. Beneficiaries must meet the definition of super law dependants.
Non-Lapsing Binding Nominations: Do not expire and provide lasting certainty. Trustees must actively consider and approve the nomination's validity.
Non-Binding Nominations
Provide flexibility but introduce uncertainty. Trustees undertake a claims-staking process to identify eligible beneficiaries and assess dependency levels. Potential beneficiaries can object to trustee decisions, which may lead to delays or disputes.
Reversionary Beneficiaries
Allow pensions to automatically revert to a nominated dependant upon death. Benefits include a 12-month delay before the pension balance impacts the beneficiarys transfer balance cap TBC and continuation of social security grandfathering if applicable. Changes to reversionary nominations may require restarting the pension, potentially impacting tax and social security outcomes.
Key Obstacles and Considerations
Invalid or Partially Invalid Nominations
A nomination is invalid if any listed beneficiary is not a super law dependant at the time of death. Fund rules vary on whether the entire nomination or only the invalid portion is affected.
Trust Deed Requirements
Trust deeds may impose additional conditions for nominations, such as specific forms or trustee approval.
No Nomination
Trustees may follow nonbinding processes or distribute benefits to the legal personal representative, creating challenges in cases of intestacy.
Planning Opportunities
Aligning Nominations with Estate Plans
Ensure your nominations reflect changes in relationships, financial dependants, and estate planning goals.
Utilising Testamentary Trusts
Direct benefits to the estate to establish testamentary trusts, which can provide tax advantages for minor beneficiaries.
Reversionary Nominations for Social Security
Preserve social security advantages for beneficiaries receiving income support.
