Superannuation Beneficiary Check

Superannuation is one of the most significant assets many Australians will accumulate throughout their lifetime. Despite its importance, many people overlook a crucial aspect: updating their beneficiary nominations. If you haven’t reviewed yours recently, it’s worth taking the time to ensure your superannuation will be distributed according to your wishes.

One of the most common oversights occurs after a divorce or relationship breakdown. Failing to update your beneficiary nomination can have serious consequences:

• Unintended Beneficiaries: If your former partner remains listed, they may still receive your super benefit, regardless of your current wishes.
• Family Disputes: Leaving an outdated nomination can create friction between your current partner, children, and other family members.

To avoid these complications, it’s essential to review and update your beneficiary nominations after significant life events such as marriage, divorce, the birth of a child, or the death of a loved one.

What Is a Superannuation Beneficiary Nomination?

A superannuation beneficiary nomination allows you to nominate who will receive your superannuation savings and any associated life insurance benefit upon your death. These nominations guide your super fund trustee in determining how to distribute your superannuation death benefit.

You can’t nominate a friend or other relative to receive your super money, but you can make arrangements through your Will for your super to be paid to those you wish. If you do not have a partner or children for your Super to go to a Will is a way to nominate who you wish.

How Many Australians Neglect Beneficiary Nominations?

According to industry estimates, around 40% to 50% of super accounts have no beneficiary nomination at all or contain outdated details.

What Happens If You Don’t Nominate a Beneficiary?

If you don’t have a valid beneficiary nomination, your super fund trustee will decide how to distribute your superannuation death benefit. This could mean:

• The benefit may be paid to your estate, which could be subject to lengthy legal processes.
• Family disputes may arise if multiple parties claim entitlement.
• Your super may not be distributed according to your wishes, leading to unintended financial outcomes for loved ones.

There are two primary types of nominations:

• Binding Nomination: Legally binding, meaning the super fund must follow your instructions as long as the nomination is valid.
• Non-Binding Nomination: A guide for the trustee, who retains discretion in deciding how to distribute your benefits.

Pros and Cons :Binding vs. Non-Binding Nominations

Both types of nominations have their advantages and disadvantages:

Binding Nominations

• Pros:
  • Provides certainty: Your super fund must follow your nomination.
  • Reduces the risk of family disputes.
• Cons:
  • Must be updated every three years (for lapsing nominations) to remain valid.
  • Can become invalid if the nominee is no longer eligible (e.g., a former spouse).

Non-Binding Nominations

• Pros:
  • Greater flexibility: The trustee can consider changes in your personal circumstances.
  • No need for periodic renewal.
• Cons:
  • Lack of certainty: The trustee has the final say on the distribution.
  • Potential for family disputes.

• Also, check if you have a Superannuation Death Benefit
• A superannuation death benefit includes the total balance of your super account and any associated life insurance. This lump sum can provide crucial financial support to your loved ones after your passing. Ensuring that it goes to the right person or people is vital.

Checking and updating your superannuation beneficiary nominations is a simple yet crucial step in financial planning. Regularly reviewing your nominations and having a Will in place ensures your savings are distributed according to your wishes.

When was the last time you checked yours? If it’s been a while, or if you’ve recently experienced a major life event, take the time to review and update your beneficiary nominations today.

If you have questions about your superannuation, or ensuring tax-effective estate planning, contact  our team atFincare Accountants for expert advice. We are here to help.