Who Inherits Your Super? Why a Binding Death Benefit Nomination Matters

Many Australians assume their Will decides who inherits their superannuation. However, as highlighted in a recent ABC News article, that’s not always the case. Without proper planning, your super fund could determine who receives your balance, which may not align with your wishes.

At Bradley and Bray Lawyers, we frequently see clients astonished by how superannuation death benefits work. Here are some key points everyone should understand:

1. Your Will Doesn’t Control Your Super

Superannuation is not automatically covered by the terms of your Will. Unless specific steps are taken, your super fund trustee decides who receives your superannuation death benefits.

2. Standard Nominations Aren’t Binding

The beneficiary nomination you made when you joined your super fund, or later updated online, is usually non-binding. This means the trustee can override it and pay benefits in a way they consider appropriate.

3. Only Certain People Can Be Beneficiaries

The law restricts who can receive your super directly. Generally, this includes:

• Your spouse or de facto partner

• Your children

• Financial dependents

• Your estate (via your legal personal representative)

Friends, siblings, or other relatives not financially dependent on you are usually not eligible.

4. No Cascading Nominations

Unlike a Will, most super funds don’t allow cascading instructions (e.g. “to my spouse, but if they die before me, to my children equally”). You can only nominate one level of beneficiaries.

5. The Solution: A Binding Death Benefit Nomination (BDBN)

The only way to ensure your super goes to your chosen beneficiaries is to make a Binding Death Benefit Nomination (BDBN). Much like a Will, it:

• Must be in writing

• Signed on paper

• Witnessed by two independent adults

With a valid BDBN in place, your super fund must follow your instructions.

6. Faster, Less Stressful for Your Family

If you have a BDBN, your super death benefits are usually paid much more quickly. Without one, disputes or delays are common, adding unnecessary stress for grieving families.

7. Self-Managed Super Funds (SMSFs)

If you have an SMSF, it’s particularly important to have a BDBN. The trust deed of the SMSF governs how nominations must be made, and in some cases, allows for cascading nominations, but this depends on the deed.

8. Don’t Forget to Renew

Many super funds require BDBNs to be renewed every three years. If you don’t renew, your nomination lapses and your fund is no longer bound.

At Bradley & Bray, we recommend:

• Reviewing your BDBN regularly

• Including a clause in your Enduring Power of Attorney requiring your attorneys to renew your BDBN if you can’t (NB: this option is effective in Queensland, but may not apply in other states)

Preparation is Key

Your superannuation is often one of your largest assets, but without a Binding Death Benefit Nomination, you risk losing control over who receives it. When we prepare Wills for clients, we always check whether they have a BDBN in place and help them put one together if they don’t.

Planning ahead saves your family time, stress, and uncertainty, and ensures your wishes are honoured.

If you have any questions regarding binding nominations or any aspects of estate planning, please contact our friendly succession team today on (07) 5441-1400.

This article is general in nature and does not constitute legal advice. If you require legal advice in relation to your personal circumstances, you must formally engage our firm, or another firm to provide legal advice in relation to your matter. Bradley & Bray lawyers takes no responsibility for any use of the information provided in this article.

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If you would like to discuss this or any other matter, call us today on 07 5441-1400 or email info@bradleybray.com.au.