Don't let someone else decide who gets your super and insurance after you have gone.
If you are over 18, having a Nomination of Beneficiary (NoB), Will and Enduring Power of Attorney (EPA) is an important common sense part of having your affairs in order.
Non binding — sometimes called preferred or discretionary, this is where the superannuation trustee will consider your nomination, but has the final say in who gets your money in what proportion. Generally, no witness is required. A new non binding nomination will not override a previous binding nomination. You can change this nomination as often as you like and it doesn't have to be renewed.
Binding — the super trustee has no discretion and must pay in accordance with your wishes as long as the nomination is valid. Depending on the super fund, the nomination will be either non-lapsing or have to be renewed at least every three years. Two witnesses who are over 18 years and who are not beneficiaries are required. The changing circumstances of a beneficiary can make the nomination invalid, e.g. death of a beneficiary, or a beneficiary no longer being dependent are some examples. Invalid nominations typically revert back to a Non Binding NoB.
No nomination — the super trustee will decide which of your dependents and/or legal personal representative they will pay and in what proportion.
Certainty, control... common sense really, when you think about it. You know best who deserves it or what's fair. It's your wishes being fulfilled once you've gone.
It's an important planning tool for all families — traditional, blended, modern or single parents and just as important for singles — young or old.
A valid nomination clearly directs where the money is to go — a partner, a dependent or a combination. The real question is "why wouldn't you make a nomination?"
The super trustee is bound by superannuation laws so you need to check what the current laws are. Generally though, the trustee can pay to:
Typically, super funds don't tell you if your nomination is not valid. You can change your NoB as often as you wish.
You can download a form from your super fund website or call them and request one. You will need to:
Bailey was tragically lost in a car accident at the age of 28. Bailey's super account was worth $25,000 and had $200,000 of life insurance attached.
Bailey didn't have a NoB or a Will.
The super fund trustee will need to determine who Bailey's dependents are and what portion they receive of the $225,000. This process may mean delays in the payment being received by Bailey's dependents or estate. A NoB could help reduce the delay in payment and provide some certainty for Bailey's dependents.
Anne's husband passed away during the Global Financial Crisis (GFC). He had made a Non Binding NoB sharing his super between Anne and the three adult children. The NoB wasn't filled in correctly and one of the kids was disputing their share. This led to an eight month delay in the super trustees paying out the benefits. During that time the insurer paid the insurance proceeds to the trustee who invested them in accordance with how Anne's husband's super account had been invested. This is usual practice.
Unfortunately, the investment markets continued to tumble during this time and the payout was $70,000 less than it could have been. A valid Binding Nomination would have meant the trustees would have had to pay out as instructed, leaving the decision to the beneficiaries as to whether they wanted the money invested in the market or not.
With some careful planning and advice, the children could have been left their share from the non super assets, meaning they could have avoided the super death tax. Proper planning could have avoided tax and investment losses.
At Gallagher, our specialists can provide guidance on the importance of having a NoB, Will and EPA in place.
The information and any advice in this article does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. When considering whether to acquire a financial product, before making any decision, you should obtain the relevant product disclosure statement.
