When planning your estate, one area that’s often misunderstood is what happens to your superannuation when you pass away. Unlike other assets, your super doesn’t automatically form part of your Will. Instead, it’s governed by the rules of your super fund – and the decisions of its trustee.

That’s where Binding Death Benefit Nominations (BDBNs) come in. A BDBN allows you to nominate specific beneficiaries – such as your spouse, children, or legal personal representative – to receive your superannuation death benefits. Provided the nomination is valid, the trustee is bound to follow your instructions.

Binding vs Non-Binding Nominations

A non-binding nomination is more like a suggestion. The trustee may consider it, but they’re not obligated to follow it. This can lead to delays, disputes, or outcomes that don’t reflect your wishes.

A binding nomination, on the other hand, gives you control. But it must meet strict requirements:

• Signed and dated by you
• Witnessed by two people who aren’t beneficiaries
• Only nominate eligible dependents or your legal personal representative

Some funds offer non-lapsing nominations, which don’t expire after three years. Others require renewal.

Tax Implications

Who receives your super can also affect how much tax is paid:

• Spouses and dependents usually receive benefits tax-free.
• Adult children may pay tax on the taxable component of the benefit.
• Legal personal representatives can distribute the benefit via your estate, which may allow for tax planning strategies like testamentary trusts.

Estate Planning Integration

Your super should be considered alongside your Will, powers of attorney, and insurance policies. Major life events – like marriage, divorce, or the birth of a child – should trigger a review of your nominations.

For blended families, this is especially important. You may want to ensure children from a previous relationship are provided for, while also protecting your current partner.

Real-Life Example

Consider a retiree with a reversionary pension in place for their spouse and a binding nomination for their adult children. This structure ensures income continuity for the spouse and a lump sum for the children – while minimising tax and avoiding disputes.

Final Thoughts

Superannuation is one of your most valuable assets. Don’t leave its distribution to chance. A valid, up-to-date binding nomination can give you peace of mind – and protect your loved ones.