A death benefit is made up of any super you have left over when you die and any death cover. Your super fund can pay it to your beneficiaries, such as a spouse or child.
You can tell your fund where to direct your money when you die, but it’s easy to overlook making a nomination and the process can be confusing.
Death benefit nominations in super may be binding or non-binding. A binding nomination means your super fund must pay the money to the people you nominate and in the proportion you choose.
If you make a non-binding nomination, your fund will refer to your wishes but has some discretion where to pay your money. Many funds only offer non-binding nominations.
Nominations may be lapsing or non-lapsing. A non-lapsing nomination stays in place until you die, while a lapsing nomination generally only lasts for three years. You can then renew the nomination. Most funds only offer lapsing nominations.
The logic is that sometimes relationships end or circumstances change, and a person’s original nomination may no longer reflect their wishes.
Some of the super funds Super Consumers Australia talked to said they’re proactive about informing members if their nomination is about to lapse.
For your death benefit nomination to be valid it needs to be in writing, signed, dated, witnessed by two adults who aren’t beneficiaries, sent to the super fund and complete so it adds up to 100 per cent.
You can usually download a nomination form from your fund’s website or contact them for more details.
A beneficiary can only be a legal personal representative or a dependent beneficiary, so you can’t nominate a parent, sibling, grandchild or friend unless they’re financially dependent.
If you want any remaining super to go to someone who isn’t a dependent, you can nominate a legal personal representative to distribute your remaining super in accordance with your will.
While death benefit distributions are generally straightforward, the best way to have peace of mind about where your money goes after your death is to have a valid nomination in place.
The key things to remember are:
- you can either leave super to a dependant or to a legal personal representative (which allows for your super to become part of your will)
- your nomination may lapse (usually after three years). When this happens your nomination can still be used as a guide by your fund, but you can renew it for greater peace of mind
- making a valid nomination can be very technical; talk to your fund if you’re unclear about the process or how to make a valid nomination.