The most recent financial warning involves a major alert on the 300,000 Superannuation Risk which is based on a rare but powerful document called the Binding Death Benefit Nomination (BDBN). Most Australians incorrectly think that their super is reflected in their Will, however, superannuation is in a trust and is external of the estate. The absence of this particular form, or done carelessly, a 300 thousand balance can lead to raging family conflicts and years of legal battles. Since account balances are increasing, the stakes have never been as high to ensure that this paperwork is done right.
Power of the Binding Nomination
The Binding Death Benefit Nomination is the only piece of paper that will make a super fund trustee legally pay your balance to a given individual. A valid BDBN eliminates the discretion of the trustee as opposed to a nomination policy that has not been enacted, which is termed as non-binding. Nonetheless, it is frequently referred to as a rare success due to tough rules of execution. Failure to have the form witnessed by two independent persons, or failure to have the dates precisely the same, causes the document to be voided and this leaves you with the balance of the three hundred thousand dollars under the control of a board of trustees instead of your heirs of choice.
The Most at Risk in Blended Families
High family dynamics is one of the key causes of family conflicts on superannuation. Under blended families, since there is a member that may want the balance of his/her $300,000 to pass to children of the time of the first marriage, but there is no valid BDBN, a current de facto partner may have a more successful legal claim in the de facto dependency regulations. These legal battles usually flare up when beneficiaries understand that they have been sidelined because of an expired form that has not been renewed within the required three year period, and the trustee is left to decide what constitutes fairness among rival claimants.
The Lapsing Forms and The Three-Year Trap
The cause of this Super Alert is one of the causes of this trap, the Three-Year Trap. The majority of BDBN forms are lapsing, i.e. they legally become out of force 36 months after signing. In the event of the death of a member once the period of the form has expired, the nomination is not binding. This is the technicality on which payouts have remained at $300,000 since the lawyers dispute the intent of the deceased. One of the most intelligent things to do to make sure that your financial legacy does not expire is to check whether your fund provides Non-Lapsing BDBN.
Litigation of What is Dependency
The second most misconstrued point of super law is who is capable of being nominated. The only legally recognizable individuals to be named under the title of dependant are those who are in an interdependency relationship or are a spouse, child of any age, or children. In many cases, there are disagreements between the members where they will nominate parents or siblings who do not qualify under the rigid legal definition of a dependant. Whenever such mistakes take place the nomination is ineffective, and the sum of 300,000 is in most cases paid into the estate, where it may be liable to increased assessments, or may be called into question by the estranged relatives and creditors.
Protecting Your Property: Take Action
To prevent a legal warning story, professionals propose a so-called Super Audit once in two years. This will require the confirmation of your BDBN as not only binding at all times but also as current and validly witnessed. Since the super balance is often greater than any other personal asset, this one document can be very significant in terms of an estate plan. You can achieve this by ensuring your $300,000 nest egg does not become the source of a bitter and expensive legal contest among your dearests by getting a non-lapsing nomination, and making it consistent with your overall financial plan.
Data Overview
| Nomination Type | Legal Power | Expiry |
| Binding (BDBN) | Mandatory | Often 3 Years |
| Non-Binding | Suggestion Only | None |
| Reversionary | Automatic (Spouse) | None |
| No Nomination | Trustee Decides | N/A |
Frequently Asked Questions (FAQs)
1. My super balance of $300,000 is covered in my Will?
No. Superannuation is not an estate asset. You need to apply your nomination of your Legal Personal Representative on a binding form in case you wish your super to be awarded as per your Will.
2. What is the case when my binding nomination lapses?
It usually goes back to a nomination that is not binding. This puts the super fund trustee in the position of determining who gets the money and this is one of the main reasons of argument in families.
3. Who is a legal dependant of super?
This is legally extended to your spouse (including de facto), your children (of any age) and to those with whom you have a close, interdependent financial and domestic life.
Disclaimer
This is informative content. The superannuation laws are complicated and fund dependent. To obtain the official advice, refer to ATO.gov.au or talk with a certified financial planner or estate lawyer.
