By nominating beneficiaries, you directly control where your superannuation savings will go. However, the choice isn’t as simple as it may seem. Two main types of nominations exist: non-binding and binding, each with distinct implications.
Understanding these differences is crucial for making an informed decision that aligns with your estate planning goals.
What are Beneficiary Nominations?
Beneficiary nominations are, in essence, your instructions to your superannuation fund. They tell the fund who you want to receive your superannuation death benefits when you pass away. Think of them as a roadmap for your super, ensuring it reaches the intended destination – your loved ones or chosen beneficiaries.
These nominations give you a level of control over your super even after you’re gone. They make sure your hard-earned savings end up in the right hands, supporting those you care about most.
However, it’s essential to remember that not all nominations carry the same weight. As we delve deeper into this topic, we’ll explore the nuances between non-binding and binding nominations, empowering you to make the most informed choice for your unique circumstances.
Also read: Binding Death Benefit Nomination: Advantages and Disadvantages
Non-Binding Beneficiary Nominations
Non-binding beneficiary nominations, as the name suggests, act as a guide rather than a strict directive. They express your wishes regarding who should receive your superannuation death benefits, but don’t legally bind the trustee of your super fund to follow them.
Think of them as a helpful suggestion. While the trustee will certainly consider your nomination, they have the final say. They’ll take into account various factors, including your family circumstances and any dependents you may have, before making a decision.
Key Points:
- Flexibility: These nominations are easy to make and update, offering flexibility as your life circumstances change.
- No Witness Requirement: You don’t need witnesses to make a non-binding nomination, simplifying the process.
- Trustee Discretion: The trustee has the ultimate authority to decide who receives your benefits, even if it differs from your nomination.
Non-binding nominations are a good option if you want a simple way to express your wishes, but understand that the final decision rests with the trustee. They’re particularly suitable for those with straightforward family situations and no complex estate planning needs.
However, if you want absolute certainty about where your super will go, a binding nomination may be a more appropriate choice.
Also read: Binding Death Benefit Nomination for Super
Binding Beneficiary Nominations
Binding beneficiary nominations, in contrast to their non-binding counterparts, carry significant legal weight. They create a legally enforceable obligation for the trustee of your super fund to distribute your death benefits exactly as you’ve specified.
Think of them as a contract. Once you make a binding nomination, the trustee is bound to honour it, provided it meets all the necessary legal requirements. This provides you with the highest level of control over where your superannuation savings will go after you pass away.
Key Points:
- Certainty: Binding nominations offer peace of mind, knowing your wishes will be followed to the letter.
- Witness Requirement: You need two adult witnesses to sign your binding nomination, adding a layer of formality and legal validity.
- Limited Review: The trustee generally can’t overturn a binding nomination unless it’s invalid or there are exceptional circumstances.
Binding nominations are ideal for those who want absolute certainty about the distribution of their superannuation death benefits. They’re particularly useful in complex family situations or when you want to ensure specific individuals or organisations receive a portion of your super. However, the added formality and witness requirement mean they’re slightly more complex to establish than non-binding nominations.
Key Differences between Non-Binding and Binding Nominations:
| Feature | Non-Binding Nomination | Binding Nomination |
| Legal Enforceability | Acts as a guide or suggestion to the trustee | Legally binding on the trustee |
| Eligible Beneficiaries | Generally limited to dependants and your legal personal representative | Can include a wider range of beneficiaries, including individuals, charities, and organisations |
| Trustee Discretion | Trustee has the final say, even if it differs from your nomination | Trustee must follow your nomination unless it’s invalid or there are exceptional circumstances |
| Setup Process and Requirements | Simple process, no witness requirement | More formal process, requires two adult witnesses to sign |
| Need for Updates/Reviews | Should be reviewed regularly, especially after major life events | Generally remains valid for 3 years unless revoked or a new one is made |
Tailoring a Client’s Nomination to Her Needs
A client approached us at Walker Pender seeking guidance on beneficiary nominations for her superannuation. She expressed a strong desire for her estate planning wishes to remain valid and unchanged unless she specifically revoked them or created a new nomination.
Our Advice:
We carefully explained the key differences between non-binding and binding beneficiary nominations, emphasizing the legal implications of each. Given the client’s desire for enduring control over her superannuation death benefits, we recommended a binding beneficiary nomination.
We highlighted the following advantages of a binding nomination that aligned with her needs:
- Certainty: A binding nomination legally compels the trustee to distribute her superannuation benefits exactly as she specifies, ensuring her wishes are upheld even after she’s gone.
- Enduring Validity: Once a binding nomination is validly executed, it generally remains in effect unless the client actively revokes it or creates a new one. This provides the long-term stability she seeks in her estate planning.
- Limited Trustee Discretion: The trustee has very limited power to override a binding nomination, providing an extra layer of assurance that her wishes will be respected.
We also explained the formalities involved in creating a binding nomination, such as the requirement for two adult witnesses. We assured the client that we would guide her through the process, ensuring the nomination is legally sound and accurately reflects her intentions.
By opting for a binding beneficiary nomination, the client can rest assured that her estate planning wishes regarding her superannuation will be honoured, providing peace of mind for both her and her intended beneficiaries.
Making the Right Choice: Tailoring Your Nomination to Your Needs
Navigating the complexities of beneficiary nominations doesn’t have to be overwhelming.
At Walker Pender, our estate planning team is dedicated to providing clear, personalised advice that empowers you to make informed decisions about your superannuation and estate planning.
Contact us today for a consultation, and let us help you craft a beneficiary nomination strategy that protects your legacy and ensures your loved ones are cared for.
