Could your super end up in the wrong hands?

Do you know what will happen to your super after you die? Here's how to make sure it goes to the right person.

After the family home, your superannuation nest egg is often one of your biggest assets. You'd naturally assume your super, and any life insurance held within it, would be divided according to your Will, right? Well, not quite.

Unless you have a valid binding nomination spelling out who you want your money to go to, there's a chance it could end up in the wrong hands.

There are two types of nominations you can make - binding or non-binding.

What's a binding nomination?

A binding nomination tells your super fund who you would like your death benefit paid to and how it should be divided. The nomination is legally binding, potentially even if your circumstances change. So, for example, if you nominate your partner and later separate, but have not obtained a divorce, your nomination remains valid and binding unless you change it or cancel it.

What is a non-binding nomination?  

A non-binding nomination guides the super fund on who will get your super when you die, but the trustee or 'manager' of the fund has the final say. The trustee is not required to follow the instructions in your Will. 

Who can you nominate?

You can nominate one or more of your dependents. This could be your current partner (married, de facto or same-sex), your children or any person who is financially dependent on you.

You could also nominate your legal representative (or executor) to allocate the money according to your Will, or someone you have an interdependent relationship with, for example, someone you have a close personal relationship with, live with and provide financial and domestic support and personal care.

How much is the death benefit?

A person's death benefit includes the money that was in their super account at the time of death, plus any life insurance cover they had through their super fund - subject to eligibility, or subject to meeting eligibility requirements.

How do you set up a binding nomination?

When making important decisions about money, it's always a good idea to seek advice from a financial planner. To set up a binding nomination you will need to fill out a 'Beneficiary Nomination' form, which is often available on the super fund's website. The nomination must be signed and dated in the presence of two witnesses who are over the age of 18, and who are not nominated beneficiaries.

How long is it binding for?

A binding nomination will typically expire after three years. After this you will usually receive a reminder from your super fund to complete a new binding nomination form if you want it to continue. If you change your mind, you can cancel a binding nomination at any time. 

Where to get help

It's important to think about any possible ramifications that putting a binding nomination in place could have, especially if you already have specific estate plans in place. A financial planner can help with this.

So although binding nominations sound complicated, they're quite simple to set up. By taking just a few minutes to fill out the form, you can ensure your superannuation will end up in the right hands.

What you need to know

Any advice in this article is general and does not take into account your personal circumstances so before making any decisions, consider your circumstances and the relevant product disclosure statement.