Securing the future of your superannuation is a crucial aspect of financial planning. Understanding the ins and outs of beneficiary nominations ensures that your hard-earned money ends up in the right hands. Let’s break down the different types of nominations and what to do if you haven’t made one or if it’s deemed invalid.
Types of Nominations:
1. Non-binding Death Benefit Nomination:
– Widely offered by superannuation funds.
– It’s like sharing your wishes on how your super should be distributed, but the trustee has the final say, exercising discretion based on your preferences.
2. Binding Death Benefit Nomination:
– A more concrete instruction from you to the trustee.
– Typically valid for up to three years, so it requires periodic renewal to remain in effect.
– If valid at the time of your passing, the trustee is legally obligated to follow your instructions.
3. Non-lapsing Binding Death Benefit Nomination:
– Similar to the binding nomination but doesn’t have an expiration date.
– Once set, it remains in place unless you decide to cancel or replace it with a new nomination.
4. Reversionary Pension Nomination:
– Relevant if you’re receiving regular income from your super.
– You can nominate a beneficiary, often a spouse, who automatically continues to receive payments upon your death.
5. SMSFs and Death Benefit Nominations:
– Self-managed super funds (SMSFs) have their own rules.
– Recent legal decisions highlight the importance of reviewing trust deeds for specific requirements.
What If You Haven’t Nominated or It’s Invalid?
– No Nomination:
– Your superannuation fund will follow its predetermined rules.
– This often involves the trustee exercising discretion, similar to a non-binding nomination process.
– If you don’t have a will, the distribution may follow state laws, potentially leading to complications.
– Invalid Nomination:
– If your nominated beneficiary doesn’t meet the criteria of a ‘superannuation law dependant’ at your death, the nomination may be deemed invalid.
– In such cases, the trustee may follow fund rules or exercise their discretion.
Top Tip: Regularly Check Your Nomination!
Life is dynamic, and so should your superannuation nomination. Regularly review and update it to reflect changes in your life circumstances, ensuring it aligns with your current wishes.
In conclusion, whether you opt for the flexibility of a non-binding nomination or the firm instructions of a binding one, understanding these options is crucial for the smooth distribution of your superannuation. Stay informed, plan, and enjoy peace of mind knowing your financial legacy is in good hands.