Non-Binding Beneficiary and Binding Beneficiary Of Your Super Fund

By FutureNestEgg | September 17, 2009

If you die, while you are still a member of the super fund then your super money has to be passed on to your beneficiaries. You have to nominate your beneficiaries.

There are two types of beneficiaries:

1. Non-binding beneficiaries

2. Binding beneficiaries

Your super death benefits can be paid to your dependants or to your legal represenative.

A legal reprensetative is the person who looks after the estate of the deceased person. If you don’t have either then the super trustee can pay it to the next of kin.

Before we dig into what each of these mean, let me first take you through who a dependant is under Superannuation Law:

a. a spouse (includes de-facto spouse)

b. your child (age is not an issue here – and also does not matter whether or not they financially dependent on you or not)

c. any one else who has an interdependecy relationship with you – close personal relationship with you And one or both of you provide financial, domestic and personal support to one another.

And here are some people who are not classified as your dependants:

a. siblings
b. parents
c. grandchildren
d. business partners
e. charities
f. friends
g. dependants spouses’

Now coming back to the type of beneficiaries…

Non-binding Beneficiary:
If your personal/relationship status is unstable then you should opt for this method. Using this method you are nominating who you prefer should receive your super money, should you die while you are a member of the super fund. So in the event of your death, the super fund will check to make sure that the persons you nominated are still your dependants and only if they satisfy the criteria, they will pass on the money to them. And also if you had new dependants since your nomination then the super money will be passed on to them as well. More than one person can get access to your super money.

Binding Beneficiary:
This nomination has to be submitted in writing and will have to be updated every three years. If your personal relationships are all stable, then you can choose this method. You nominate in writing who should get the money and also what percentage should each get. In the event of your death, checks will be done to make sure if the people you nominated are still your dependants and if they are then the money will be passed on as per your request.

If you have nominated your beneficiaries, contact your super fund…They will direct you to the right forms you need to fill in.

And here are a few important words from me: Don’t take my word for your legal and money matters – I am not a qualified financial planner – So take my posts only as first steps, then do your research.

Click here to read more Superannuation Misunderstood Terms

Any thoughts on this post, please leave a comment below…

Best,