Beneficiary options
If you have a valid binding death nomination your choice will determine who gets your super assets (including any life insurance) when you pass away. A beneficiary can be a spouse, children, someone who is in an interdependency relationship with you, someone financially dependent on you or your estate. By taking a few simple steps today, you’ll give peace of mind to loved ones in a time of stress and hardship sometime in the future.
Generally, if you don’t have a valid binding nomination in place the Trustee will decide who receives your benefit if you die.
If you have made a non-binding nomination the Trustee may use this information to assist with its decision but ultimately who receives your death benefit and the proportions could be different to what you have requested.
If you are a pensioner and have nominated a reversionary beneficiary it is important to remember that this nomination takes precedents over any other nomination you might make and must be followed if the person nominated is an eligible superannuation dependant at the time of death.
Nominating beneficiaries helps the Trustee understand who you want to receive your benefit in the event of your death. Not making a nomination means that your wishes might not be taken into account when the Trustee decides who will be paid and in what proportions.
To understand more about what benefit payment options will be available to your beneficiaries if you pass away you can call us on 1800 060 312. Further information on the tax and Centrelink consequences for beneficiaries receiving a death benefit can be found on ato.gov.au and servicesaustralia.gov.au
You can nominate the following individuals to receive your superannuation benefit:
- Spouse (legal and/or de facto);
- Children (including step, adopted, ex-nuptial);
- A financial dependant at the date of death;
- A person in an interdependent relationship with you at your date of death; and/or
- Your legal personal representative (Estate)
A Dependant is defined as:
(a) the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship at the relevant time (being in the case of a deceased person the date of their death); and
(b) any other person who, in the opinion of the Trustee, is at the relevant time (being in the case of a deceased person the date of their death) wholly or partially dependent on the person.
Interdependency
Two persons have an interdependent relationship if:
(a) they have a close personal relationship;
(b) they live together;
(c) one or each of them provides the other with financial support and
(d) one or each provides the other with domestic support and personal care.
Two people have an interdependency if they have a close personal relationship but do not satisfy the other requirements of an interdependency relationship because either or both suffer from physical, intellectual or psychiatric disability.
If you wish your benefit to pass to your estate, or you don’t have any dependant to nominate, you may instruct the Trustee to pay your benefits to your legal personal representative in a valid binding nomination. Your nomination should be carefully considered and updated regularly or whenever your personal circumstances change.
If you don't nominate someone specifically, the Trustee may decide to:
- Look for eligible beneficiaries and pay them directly.
- Pay your benefits to your estate so that benefits are divided according to your Will. If you die without a Will, your benefits in your estate will be divided according to state-based law.
So, without a valid binding nomination your super may not end up where you intended and it can take longer to be paid as more evidence will need to be gathered and considered to understand your circumstances at the time of death.
All lump sum death benefit payments made to a ‘tax dependant’ will be tax-free.
A ‘tax-dependant’ includes your spouse, a child of yours under 18 years of age, a person who is a financial dependant and a person with whom you have an interdependent relationship. Death benefit payments to a non-tax dependant will be taxed at 0% on the tax free component of the benefit, a maximum of 15%* on the taxable (taxed) component and a maximum of 30%* on the taxable (untaxed) component.
A non-tax dependant for this purpose includes an adult child aged 18 or more that is not a financial dependant. Where a death benefit is paid to your legal personal representative, tax will be payable according to who will benefit from your estate. The taxable (untaxed) component generally consists of proceeds from insurance you held within legalsuper.
* Medicare levy and Medicare levy surcharge (if applicable) are added to these rates.
Superannuation is generally not an estate asset and will not automatically get distributed according to your will. Your death benefit will only form part of your estate if you have made a valid binding nomination requesting that your death benefit is paid to your Legal Personal Representative or if the Trustee decides to pay your death benefit to your estate.
Non-binding nomination
A non-binding beneficiary nomination guides the legalsuper Trustee in deciding who will receive your superannuation benefits (including any insured benefits applicable) in the event of your death, referred to as your death benefit. This type of nomination is not legally binding; however, it will be considered along with the rules in legalsuper's Trust Deed and superannuation legislation.
How do I make a non-binding beneficiary nomination?
- Log in to MemberAccess and complete the nominations under the ‘beneficiaries’ section.
- Alternatively, download and complete the appropriate beneficiary nomination form for your account type. Remember to make sure that your allocation totals 100%.
- You can check who your nominated beneficiary/ies are on your Annual Statement or via MemberAccess.
Binding beneficiary nomination
A binding beneficiary nomination is a formal written direction from you to legalsuper to tell us who you want your super paid to if you pass away. It is a legally binding document, and the Trustee is required to follow a valid binding nomination made by you. You can only nominate dependant(s) or your legal personal representative (estate) in a binding nomination. Your nomination is only valid if it fulfills specific requirements including that the dependant(s) nominated are still your dependant(s) at the time of your death. A binding nomination comes into effect from the date we accept it and expires three years from the date you signed the form. You can change or cancel your nomination at any time.
It is important that you regularly review your nominations to ensure that those nominated are still those you wish to nominate and they are still your dependants. For example, a separated but not divorced legal spouse would still be a dependant under superannuation law and the Trustee would be obliged to follow your binding nomination if you pass away if they are nominated. It is therefore important that you regularly update nominations when your circumstances change.
It is important that you also consider the implications of who you nominate, as there may be tax, Centrelink or other consequences for those you choose.
The Trustee must follow a binding nomination where it is valid so being aware of the consequences might have a material impact on your beneficiaries.
For example, John is a member of legalsuper and decides to nominate his non-financially dependent adult children ahead of his spouse in a valid binding nomination. As his adult children are valid superannuation dependants, the Trustee is obliged to pay the benefit the way he has nominated. John didn’t consider that a benefit paid to his spouse would have been tax-free on his death. As John’s adult children are not financially dependent, a tax rate of up to 30% plus the Medicare levy can be withheld from the benefit on payment. You can make a binding nomination by completing the Nomination of beneficiary/ies– superannuation or Nomination of beneficiary/ies – pension available at legalsuper.com.au
Key things to remember-
- Make sure your nomination is clear and the proportions add up to 100% (in total)
- Make sure you only nominate superannuation dependant(s) and/or your Legal Personal Representative (LPR)/Estate. If you nominate anyone else your nomination would not be valid.
- Make sure you clearly identify the account your nomination applies to.
- To make it binding sign the form in the appropriate location and ensure 2 adults (who are not nominated) witness your signature and the dates of witnessing and signing all align.
- For binding nominations, it is only valid for 3 years so you will need to reconfirm your nomination to ensure it remains valid.
Having a binding nomination in place will likely mean the death benefit payment process will be far smoother and the time it takes will be shorter.
If you don’t have a binding nomination in place, the Trustee will need to have greater contact with your dependants, which can take time as evidence from potential beneficiaries need to be gathered to understand who was financially dependent on you and your circumstances at the date of death. The more parties involved, the longer it may take to gather all necessary evidence. It is not uncommon for this process to extend over several months.
How do I make a binding nomination?
- You can set up or change your binding nomination by downloading and completing a valid ‘Nomination of beneficiary/ies’ form for your account type.
- Your nomination should be carefully considered and updated regularly or whenever your personal circumstances change.
Reversionary beneficiaries
A reversionary beneficiary can only apply to legalsuper's Pension and Transition to Retirement Pension accounts. It cannot apply to a Personal super or Employer-sponsored super accumulation account.
A reversionary beneficiary is the person who will receive the balance of your death benefit as an income stream. They will need to be your dependant at the time of your death. Only spouses, certain children and dependants are eligible to become reversionary beneficiaries.
When making a reversionary nomination members should consider that tax, Centrelink and other consequences (including transfer balance caps) may apply for the nominated beneficiary. You may wish to seek personal advice if you are unsure of the implications. Further information can also be found on ato.gov.au and servicesaustralia.gov.au.
| Beneficiary | Who can be nominated as a reversionary beneficiary? |
| Spouse | An Income Stream may be paid if nominated as a reversionary beneficiary. |
| Children under age 18 | An Income Stream may be paid if nominated as a reversionary (The benefit must be commuted and paid as a lump sum when the child turns age 25) |
| Children aged 18-25 who are financially dependent | An Income Stream may be paid where nominated as a reversionary (The benefit must be commuted and paid as a lump sum when the child turns age 25 unless the child is regarded as meeting a specific criteria for bein permanently disabled) |
| Interdependency Relationship | An income stream may be paid if nominated as a reversionary. |
| Financial Dependent (who is not a child) | An Income Stream may be paid if nominated as a reversionary beneficiary. |
A reversionary nomination is considered valid if the recipient is an eligible dependant at the time you pass away.
How do I nominate a Reversionary beneficiary?
You can only nominate one person as a reversionary beneficiary. A valid reversionary beneficiary nomination is binding on legalsuper and can only be established when creating a new pension account.
For more information, please refer to the Product Disclosure Statement.
