Lawyer James Glissand says Aussies lose hundreds of thousands of dollars every year because they think their will controls their super. (Source: James Glissand/Getty)
Millions of Australians are being warned about a common superannuation mistake that could lead to hundreds of thousands of dollars being lost and heated legal disputes. Aussies might assume their will covers who receives their superannuation, but this isn’t the case.
A binding death benefit nomination determines where the money from your super goes when you die. As the name suggests, it is legally binding, but most will lapse or expire after up to three years.
Glissan & Associates Lawyers practice manager James Glissan told Yahoo Finance that without a binding death benefit nomination, the trustee of your super fund decides where your superannuation goes and this could be “totally different” to what your will says.
RELATED
“It’s definitely one of the factors that leads to a lot of family provisions claims, because obviously, once the big nest egg is removed from the intentions of the will, that tends to cause a lot of animosity and a lot of fights between people,” he said.
Glissan gave the example of a Western Australian man who left everything in his will to his kids. Despite this, his super fund paid more than $300,000 to his de facto partner instead of his kids because his binding death benefit nomination form had lapsed.
“One of the big issues is people will do it once. Understandably, people often think that it works like a will, and that it is binding until you change it, or until there’s some triggering event,” he said.
“But more often than not, most super funds have this three-year expiration period, so it can become lapsed. Even if it doesn’t lapse, if in those three years you get married or divorce or have kids, you should probably consider updating it.”
Do you have a story to share? Contact tamika.seeto@yahooinc.com
More than a third of people surveyed by Super Consumers Australia had no death benefit nomination with their super fund, while 25 per cent didn’t know if it was binding.
Glissan noted there had been a “massive spike in disputes over wills”, partially due to estates becoming significantly larger. Experts expect disputes will continue to become more common as older Australians transfer an expected $5.4 trillion to younger generations over the next 20 years.
A death benefit nomination allows you to nominate who you would like to receive your super benefits in the event of your death.
Story Continues
They can be binding or non-binding. A binding nomination will be legally binding, while a non-binding nomination will let your fund know about your wishes, but can be overruled. The super trustee will get to decide who gets the money under superannuation law and regulations.
“That’s what leads to a lot of disputes as well because you have your ex-partners or estranged relatives, blended families and the trustee may not necessarily follow what the will intends,” Glissan said.
You can’t nominate just anyone and it’ll need to be dependants, such as a spouse or de facto partner, your children, a financial dependent or an interdependency. You can also nominate your estate.
A binding nomination will generally require you to complete a form and sign it in the presence of two witnesses who are not beneficiaries.
It is generally valid for three years, so you’ll need to renew it before the time is up or it will become non-binding.
Glissan recommended three simple steps that Aussies can take to stop this from turning into a “monumental issue” where the intended recipients of your superannuation miss out.
First, check that you have a binding death benefit nomination.
Second, check that it is valid and hasn’t lapsed due to the three-year rule.
Third, check that your super is going where you want it to go.
“It only takes, realistically, 10 to 15 minutes, assuming you know what your login is to your super. So it’s a really easy fix,” Glissan said.
Get the latest Yahoo Finance news – follow us on Facebook, LinkedIn and Instagram.