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Planning and advice | | 2 min read
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When planning for your future, one important step is ensuring that your super and insurance benefits are distributed according to your wishes after you pass away. 

Unlike assets such as your home or car, super and insurance benefits don’t automatically form part of your estate. Instead, the trustee of your super fund is responsible for distributing your funds to your dependant(s) or legal personal representative.

This is where beneficiary nominations come in. In this article, we’ll explain the difference between binding and non-binding beneficiary nominations and how they can impact the distribution of your super and associated insurance benefits.

What is a beneficiary?

A beneficiary is the person or entity who will receive your super or insurance benefits upon your death. They must meet certain eligibility criteria under superannuation law, such as being a dependant or in an interdependency relationship with you.

A dependant is defined as your spouse, de facto spouse, former spouse, child, or anyone else who depended on you.

An interdependency relationship is defined as two individuals:

  • who have a close personal relationship; and
  • who live together; and
  • where one or each of them provides financial support; and
  • where one or each of them provides domestic support and personal care.

Binding death benefit

A binding beneficiary nomination allows you to specify who will receive your super including any insured benefits. This type of nomination is legally enforceable, meaning the trustee must follow your instructions. A valid binding nomination ensures faster payment of benefits, as the trustee doesn’t need to make a decision.

Who can you nominate?

Rules apply to who you can nominate as a beneficiary, usually:

  • dependants
  • people in an interdependency relationship with you, and
  • your legal personal representative (estate).

How the benefit is paid: 

Typically, benefits are paid as a lump sum to your nominated beneficiary. In some cases, dependants can opt to transfer the benefit into an income stream.

Important: Binding nominations must be renewed every three years to stay valid. If a nomination expires or is invalid, it may be treated as a non-binding nomination.

Binding death benefit nomination form:

To make, change, or cancel a binding nomination, you’ll need to complete a Making a Death Benefit nomination form or contact Equip Super.

Nominate your binding beneficiaries

Non-binding death benefit 

A non-binding beneficiary nomination expresses your preference for who you'd like to receive your super, including any insured benefits. However, this nomination isn’t legally enforceable, meaning the trustee has the discretion to decide who receives the benefits and in what proportions.

The trustee is bound by superannuation law first and foremost, and is likely to prioritise:

  • your spouse (including de facto partners)
  • children under 18 
  • financially dependent children.

While the trustee typically takes your preferences into account, non-binding nominations leave room for flexibility, and the trustee may distribute the funds differently if appropriate.

How the benefit is paid:

  • Benefits are usually paid as a lump sum, although dependants may choose an income stream.
  • Non-binding nominations don’t expire, but you can change or cancel them at any time.

To make or change a non-binding nomination, simply complete a Making a Death Benefit Nomination form or contact Equip Super. You can also make a non-binding beneficiary nomination by logging into your Equip Super account.

Nominate your non-binding beneficiaries

Binding vs non-binding death benefit nominations 

The choice between binding and non-binding nominations depends on your need for certainty versus flexibility.

  • Binding nominations offer certainty and control. They ensure your super is distributed exactly as you wish, but you must review it every three years.
  • Non-binding nominations provide flexibility, as the trustee can make the final decision on distribution. This may be suitable if you prefer the trustee to consider the circumstances at the time of your death.

The benefits of a binding death benefit nomination

Making a binding beneficiary nomination ensures your super, including any insured benefits, goes to the people you want. Without a binding nomination, the trustee will decide how your funds are distributed, which may not align with your wishes. Binding beneficiary nominations help avoid delays, legal disputes, and confusion during a difficult time.

Reversionary beneficiary option for retirement members

If you have a Transition to Retirement Income account or Retirement Income account with Equip Super, you can nominate a reversionary beneficiary. This person will continue to receive your income stream after your death, provided they were a dependant for tax purposes at the time of your death. This option ensures a smooth transition for your beneficiary to receive the income stream. An Equip Super financial planner can provide additional details about this type of arrangement and how to set it up.

Keep your nominations up to date

It’s essential to review and update your nominations regularly, especially after major life events such as marriage, having children, or changes in relationships. Keeping your nominations current ensures either that your super is distributed according to your wishes or that the trustee will consider your wishes when deciding how to distribute your super. 

To make changes to your nominations, simply use the forms provided or contact Equip Super’s Helpline.

Take the next step

Choosing between binding and non-binding beneficiary nominations is an important decision when planning for your future. Binding nominations offer certainty and fast distribution of your benefits, while non-binding nominations provide flexibility. Either way, it’s important to understand the differences and to keep your nominations up to date, giving you peace of mind for the future.

Issued by Togethr Trustees Pty Ltd ABN 64 006 964 049, AFSL 246383 ("Togethr"), the Trustee of Equipsuper ABN 33 813 823 017 ("Equip Super"). The information contained is general advice and information only and does not take into account your personal financial situation or needs. You should consider whether this information is appropriate to your personal circumstances before acting on it and, if necessary, you should seek professional financial advice. Where tax information is included, you should consider obtaining taxation advice. Before making a decision to invest in Equip Super, you should read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product which are available at equipsuper.com.au. Financial advice may be provided to members by Togethr Financial Planning Pty Ltd (ABN 84 124 491 078 AFSL 455010) – a related entity of Togethr. Past performance is not a reliable indicator of future performance.

© 2023 Togethr Trustees Pty Ltd ABN 64 006 964 049 AFSL 246383 — *Past performance is not an indication of future performance.
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