Why Binding Death Benefit Nominations are crucial in Estate Planning

Associate Jane Song from HHG Legal Group’s Wills, Estate and Succession Planning team discusses the critical role of Binding Death Benefit Nominations in ensuring your superannuation is distributed according to your wishes.

Superannuation has become one of the most significant assets many Australians will ever own. As property prices soar and housing affordability continues to be a challenge for younger generations, superannuation often represents one of the largest components of a person’s wealth, especially in retirement.

Yet despite its financial weight, superannuation is frequently misunderstood in the context of estate planning. Many people assume that their superannuation will automatically form part of their estate and is distributed under the terms of their Will. However, this is not the case. Without proper arrangements, one of your most valuable assets could be distributed at someone else’s discretion.

This article explains the difference between binding and non-binding nominations and highlights why a Binding Death Benefit Nomination (BDBN) is essential in managing your superannuation after death.

Superannuation: Outside the Estate

Superannuation is held in trust by your super fund — whether that’s a Self-Managed Super Fund (SMSF) or a retail/industry fund. Because of this legal structure, superannuation is not considered personally owned and does not automatically form part of your estate.

This means that your Will does not control who receives your superannuation unless you have specifically directed it to your estate via a valid nomination. In the absence of such direction, the trustee of your super fund decides who receives your superannuation death benefits and any associated insurance payout when you pass away.

This is where BDBNs come into play.

Binding vs Non-Binding Nominations

It is important to note that there are two ways that superannuation funds allow members to nominate who they would like their super to go to upon death:

Non-binding nomination – This is merely an indication of your wishes. The trustee still has the ultimate discretion as to who to distribute your superannuation to, and they may or may not choose to follow your wishes, depending on who they determine to be your eligible dependents.
Binding Death Benefit Nomination (BDBN) – This is a legally binding instruction to the trustee about exactly who should receive your super benefits when you die. Provided the nomination is valid, the trustee must follow it.

Essentially, one is binding on the super fund trustee, and the other is not.

Key Reasons Why BDBNs Are So Important

Control and Certainty Over Who Receives Your Super

Without a valid BDBN, you are relying on the trustee of your super fund to decide who your death benefits go to. This could potentially result in outcomes that don’t align with your wishes. For example, an estranged family member or someone you didn’t intend could be deemed eligible. This uncertainty can cause stress and disputes among surviving loved ones.

A BDBN ensures that your death benefits go to the person or people you want it to — whether that’s your spouse, children, or even your legal personal representative (so it forms part of your estate and is distributed according to your Will).

Faster Access to Funds

Another major benefit of BDBNs is that they can lead to faster distribution of funds. When a binding nomination is in place, there is less ‘red tape’ as the trustee does not need to conduct a lengthy investigation to determine eligible beneficiaries, they simply need to follow your instructions.

This can be especially helpful for loved ones who might need immediate access to funds for living expenses, funeral costs, or other financial pressures during an already difficult time.

Protection Against Disputes and Challenges

Family disputes over inheritance are becoming increasingly common, and superannuation can often be at the centre of these arguments. By having a valid BDBN in place, you reduce the chances of disagreement and legal challenges among surviving family members.

While a Will can be contested in court, a properly executed BDBN offers a strong line of defense because it legally binds the trustee to your nomination, reducing the scope for dispute.

Added Security Against Fraud

To be valid, a BDBN generally must be signed by the member in the presence of two adult witnesses, who also sign the document. This provides a level of verification and reduces the risk of fraudulent changes being made to the nomination. This is in contrast to making a non-binding nomination, which, for many industry superannuation funds, can simply be done by logging in to your online account and nominating a preferred beneficiary — a process that, while convenient, lacks the same level of formal verification.

There have been disturbing cases where superannuation accounts have been accessed fraudulently. For example, in Western Australia, an ex-boyfriend accessed his deceased girlfriend’s online super account and changed her non-binding nomination to make himself the beneficiary. He was later sentenced to prison, but it highlights the potential vulnerabilities of non-binding nominations — and the need for stronger safeguards like those offered by a BDBN.

Important Considerations

While BDBNs are powerful tools, there are some important rules and limitations to be aware of:

They must be renewed regularly: Most BDBNs are only valid for three years unless your fund offers a non-lapsing option.

You can only nominate certain people: Eligible beneficiaries under superannuation law include your spouse, minor and adult children, financial dependants, or your legal personal representative (i.e. your estate).

They must be properly executed: A BDBN is only valid if it meets strict criteria, which depends on the terms of the trust deed. Often it includes being in writing, signed and dated by you, and witnessed by two adults who are not nominated beneficiaries.

Regular review is essential: Just like your Will, your BDBN should be reviewed regularly to ensure it reflects your current intentions. As personal circumstances change (e.g. divorce, the birth of a child, or forming a blended family), your existing nomination may no longer be appropriate. Reviewing it periodically helps ensure your superannuation is distributed according to your updated wishes.

Final Thoughts

Superannuation plays a vital role in most people’s wealth, yet it’s often not addressed properly in estate planning. A Binding Death Benefit Nomination is not a mere formality — it’s a powerful legal tool that ensures your superannuation is passed on according to your wishes, not someone else’s decision.

If you haven’t reviewed your superannuation nominations recently, or aren’t sure whether your current nomination is binding, now is the time to act. Taking control of your super’s future distribution is one of the most effective steps you can take to provide financial certainty to your loved ones and reduce the risk of disputes or delays.

It’s also wise to ensure your BDBN aligns with your broader estate planning goals. Too often, both individuals and advisors focus solely on the Will, neglecting the significant wealth sitting in super.

In short: don’t leave your superannuation to chance. A valid Binding Death Benefit Nomination ensures your intentions are respected and your loved ones are protected.

*This information serves as a general guide and does not constitute legal advice. It is based on our research and experience at the time of publication. Please consult our knowledgeable legal team for any specific inquiries or advice relevant to your circumstances, as the content may not have been updated subsequently.

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