When it comes to superannuation, many people assume their retirement savings will automatically pass to their loved ones upon death. Unfortunately, that’s not always the case. Unlike assets covered by your will, superannuation is treated separately. To ensure your super goes to the right people, you need a Binding Death Benefit Nomination (BDBN).
What is a binding death benefit nomination?
A BDBN is a formal directive you give to your superannuation fund, specifying who should receive your superannuation benefits when you pass away. If the nomination is valid, your fund is legally required to follow your instructions. This provides peace of mind that your super will be distributed according to your wishes.
Without a binding nomination, your super fund has discretion over who receives your benefits. This could result in your super being allocated in a way that doesn’t reflect your intentions. In such cases, the fund typically follows legal guidelines around eligible dependants.
The three-year expiry rule
Most BDBNs expire after three years, meaning they must be renewed periodically to remain valid. If your nomination lapses and isn’t updated, your super fund will again have the authority to decide who receives your benefits.
To avoid this, many people set reminders to review their nomination every few years. Significant life changes—such as marriage, divorce, or the birth of children—are also ideal times to revisit and update your BDBN.
Non-lapsing binding nominations
Some super funds offer non-lapsing binding nominations, which do not expire. Once you make a valid non-lapsing nomination, it remains in place unless you choose to change or cancel it.
However, not all super funds offer this option, and each fund has its own rules about how non-lapsing nominations work. It’s important to check with your fund to see if you can make one and whether any conditions apply.
Binding nominations in SMSFs
If you have a self-managed super fund (SMSF), the rules around BDBNs can be different. Unlike large super funds, where trustee discretion is limited by the rules of the fund and superannuation laws, SMSFs can have more flexibility. Some key differences include:
- No automatic expiry: In many SMSFs, binding nominations do not expire unless the trust deed specifically states otherwise. This is different from retail and industry super funds, where nominations often expire after three years.
- Customised rules: The rules about binding nominations in an SMSF depend on the trust deed, which is the legal document that governs the fund. Many SMSFs allow non-lapsing nominations, while others may require regular updates. Also, some SMSFs allow cascading nominations i.e., instructing the fund to pay a death benefit to a secondary beneficiary if the primary beneficiary predeceases the member.
- Trustee control: Since SMSF trustees are usually fund members themselves, there can be potential conflicts of interest when deciding how to distribute super benefits. A well-structured binding nomination can help prevent disputes among family members.
If you have an SMSF, it’s crucial to check your trust deed and ensure your nomination aligns with the fund’s rules.
Who can you nominate?
When making a binding nomination, you can’t just choose anyone – you must nominate one or more ‘eligible beneficiaries’. These include your:
- Spouse (including de facto and same sex partners)
- Children (including adopted or stepchildren)
- Financial dependants (such as someone who relies on you financially)
- Interdependents – someone you share an interdependent relationship with (such as a person you live with, have a close bond with, and where one or both of you provide financial assistance, domestic support, and personal care)
- Legal personal representative (your estate, so your super is distributed according to your will)
If you nominate someone who isn’t eligible, your nomination will be considered invalid, and the super fund trustee will decide who receives your super.
How to make a valid binding nomination
To ensure your nomination is legally binding, follow these steps:
- Check your fund’s rules: different funds have different requirements for binding nominations.
- Complete the required form: your super fund will have a specific binding nomination form you need to fill out.
- Nominate a dependant or legal personal representative
- Ensure the proportions add up to 100%
- Sign and date it in the presence of two independent witnesses (over 18 and not beneficiaries)
- Submit the completed form to your super fund
Final thoughts
A BDBN is an essential tool for ensuring your superannuation is distributed according to your wishes. If you don’t have one in place, or if yours has expired, your super fund may decide who gets your money – and it might not be who you intended.
Whether you choose a standard nomination with a three-year expiry, a non-lapsing nomination, or an SMSF-specific arrangement, keeping your nomination up to date is key. Take the time to review your super fund’s rules and ensure your hard-earned super goes to the ones you love.