JDFP - Diversity by Design

Nomination of Beneficiary

A Beneficiary is someone who will receive the benefit of your Superannuation or Insurance policy when you die.

When you nominate a Beneficiary, you are instructing the company to pay out the funds according to your wishes.

For a Life Insurance Beneficiary

This is fairly simple. Whoever you nominate is generally the one who gets the proceeds of the policy. Other considerations include the ownership of the policy as any surviving owner will receive the proceeds before the beneficiaries nominated.

For a Superannuation Beneficiary

There are a number of different type of nominations.

Non Binding Nominations, This is the most common. You instruct the trustee to consider your wishes in the event of your death. However, the Trustee of the superannuation fund is NOT bound by your nomination. Very occasionally they do not follow your wishes. As the family unit gets more complex with children, devorced partners, and ageing parents being looked after by family, this could become a bigger issue in the future.

Binding Nominations, These are becoming the norm for people wishing to nominate Beneficiaries to their accounts. This brings Superannuation accounts in line with Life Insurance policies. You nominate the Beneficiaries and the Trustee is bound by your nomination, regardless of any other complications.

There are some variations to the Nominations listed above, this is about time the Nomination lasts, some have a 2, 3 or 5 years time frame before they drop off the policy. Others are called Non Lapsing, which will not fall off the policy or change until you instruct the Trustee to change it.

What happens in the event of Death for a Superannuation Member

Members have the ability, if the fund rules provide, to dictate how their benefit should be dealt with on their death – to whom, how much, lump sum, death benefit pension or a combination.

For this to operate successfully upon the members death, the instructions must be valid, conform to both the law and the fund rules and the beneficiary must be able to be paid the benefit under the law and fund rules.

The most common situations are:

 The member dies with no directions or instructions given:
‒ The trustee has full discretion to distribute the deceased benefits to super dependants or LPR as they see fit or as the fund rules dictate.

 The member dies with an invalid or illegal nomination or direction or reversionary:
‒ The trustee has full discretion to distribute the deceased benefits to super dependants or LPR as they see fit or as the fund rules dictate.

 The member has made a valid non-binding death benefit nomination or direction:
‒ The trustee will take the request under consideration but is not bound to follow it. Under normal circumstances, it is likely the trustee will follow the request.

 The member has made a valid binding death benefit nomination or direction:
‒ The trustee is bound to follow the members instructions and distribute the benefit according to those instructions. The LPR cannot change the instruction after the death of the member.

 The member is in pension mode and has nominated a reversionary pensioner and that person is still a super dependant at the time of death:
‒ The pension continues uninterrupted to the reversionary beneficiary. The trustee has no discretion.