Most people assume their will covers everything they own, but it doesn’t. Super, for example, sits outside your estate. This means your will has no say over who gets it.
Instead, the death benefit nomination you’ve made with your fund decides where your super goes. However, for many people, that nomination is missing, outdated, or non-binding.
Binding and non-binding nominations
It is important to understand the difference between a binding and non-binding death benefit nomination.
A non-binding nomination is an indication of your preference. The fund’s trustee can consider it but doesn’t have to follow it. Instead, they can use their own discretion to decide who receives the money, based on who they judge to be financially dependent on you.
A binding nomination is different. If it’s valid and up to date, the law requires the trustee to follow it. That means no discretion, no interpretation, and no waiting on someone else’s decision about your family.
When things can go wrong
Some situations are especially vulnerable to disputes. For example, after a second marriage, an ex-partner may still be the default beneficiary because no one thought to update it.
Problems can also arise in blended families. Adult children from a first relationship and a current spouse may both have a claim, with no clear instruction in place.
Even something as simple as a de facto partner can cause issues. A fund may not recognise them without documentation, because no nomination was ever on file to remove the ambiguity.
Without a binding nomination, the trustee decides. Their idea of who should receive the money doesn’t always match what the person actually wanted. In fact, families have ended up in tribunal disputes over similar issues. As a result, delays can stretch well beyond what anyone expects at an already difficult time.
Don’t let your nomination lapse
Most binding nominations lapse after three years unless you renew them. It’s easy to make one once and assume it’s sorted forever.
However, funds usually treat an expired nomination as invalid, and it reverts to non-binding. The protection then quietly disappears, and no one notices until the family needs it.
Checking who’s nominated on your super account only takes a few minutes. It’s also worth checking that the nomination is still binding and current. After all, a quick check now can help avoid your estate unravelling later.
Talk to your adviser about setting up or reviewing your super death benefit nomination.