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What to consider when nominating your beneficiaries

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Published 14 June 2021

You are growing your superannuation to fund your dream retirement. But what happens to your super in the event of your death?

You can arrange for your family to receive your super after you have gone. These are your beneficiaries, and you can nominate them with your super fund.

We’ve listed 10 things that you should know about nominating beneficiaries, which could help your family in the future.

1. Super is not automatically part of your estate

Your super can be one of your biggest assets. But did you know it does not automatically form part of your estate, even if your wishes are included in your Will?

Super is different from other assets such as a house, savings or investments because it is held in trust by your super fund until you or your beneficiaries are eligible to access it.

To arrange who receives your super in the event of your death, you will need to nominate your beneficiaries with LGIAsuper.

2. You’re passing on your super plus any insurance

Your beneficiaries will receive the amount of money in your super account plus any insurance benefit that is payable. This is called a superannuation death benefit.

3. A binding death benefit nomination gives you greater certainty

A binding death benefit nomination is a legal document that binds LGIAsuper to pay your death benefit to whoever you have nominated – if they are eligible to receive your benefit at the time of your death (more on that below).

Making a valid binding nomination puts you in control, and it can make it quicker and easier for your loved ones to receive their money after you’ve gone.

A binding nomination can be particularly useful if you have a complex family situation, such as an ex-partner or children of a current and former relationship.

4. You can pass on your pension income stream to a beneficiary

Another type of nomination is called a reversionary beneficiary nomination. This is when your pension can continue to be paid as a pension to your beneficiary (generally your spouse).

Before nominating a reversionary beneficiary, it’s a good idea to contact us so we can explain all factors involved with this type of nomination. Your pension payment may affect a reversionary beneficiary’s financial position, including their tax situation and/or Centrelink benefits.

5. Make sure your nominations are valid

LGIAsuper can only pay a death benefit to a valid beneficiary (as required by law), which can be one or more of the following:

a. Your dependants, which are defined as:

  • a spouse – married, de facto or same-sex partner.
  • any child – including stepchildren, adopted children, ex-nuptial children, or anyone who fits the definition of a child under the Family Law Act 1975.
  • any person in an interdependent relationship with you – defined as someone you have a close relationship with, you live together, and one or each of you provides the other with financial and domestic support and personal care.
  • any person who was wholly or partially financially dependent on you.

b. Your legal personal representative – for example, an executor of your Will or administrator of your estate.

  • This can help if you want to leave your super to someone who is not a dependent, and you can outline who you would like it distributed to in your Will.
  • In this instance, the death benefit is paid directly to your estate. It is then distributed by the legal personal representative according to your Will.

Full details about the eligibility of dependents and interdependent relationships are available in our Nominating your beneficiary guide.

6. If you haven’t nominated beneficiaries, your super fund determines how to distribute your death benefit

In the event of your death, LGIAsuper will generally pay your benefit to your dependant/s or legal personal representative.

If you die without nominating a beneficiary, LGIAsuper would pay your death benefit in line with the rules set out in our Trust Deed and superannuation legislation.

This means we are required by law to determine how to distribute your money. If you have a complex family situation – the outcome could be different to what you had in mind.

7. Beneficiary nominations have expiry dates

Binding nominations are valid for three years. Your annual statement or Member Online account will show whether you currently have a valid nomination in place.

We will also send you reminders when your nominations are about to expire. You can renew your nomination over the phone or change or cancel your nomination.

8. You can change your nominations whenever you like

Your circumstances may change, and you may need to update your beneficiaries. For example, you may have a new son or daughter, or one of your beneficiaries is no longer a dependant.

You can change or cancel your nomination at any time.

To change or cancel your previous nomination, complete a new Binding death benefit nomination form.

9. Payments are tax-free for dependants, but not for non-dependants

Death benefits paid as a lump sum are tax-free if paid to an eligible dependant as defined by the Australian Taxation Office.

If a death benefit is paid to someone not considered a dependant, including an adult child who is not financially dependent on you, the benefit’s taxable portion is taxed at 17%. The untaxed component is taxed at 32%. The taxed and untaxed components are calculated at the time of payment.

Death benefits taken as a reversionary pension are taxed differently.

Further information on taxation is in our Nominating your beneficiary guide.

10. A binding nomination must be made in writing

To make a binding death benefit nomination, you will need to complete and return the Binding death benefit nomination form.

LGIAsuper will confirm in writing if your nomination has been accepted and the date it expires. If your nomination is invalid, we will let you know why and how you can make it valid.

Further information

Before you make a nomination, we recommend you read our Nominating your beneficiary guide.

We also recommend you seek professional advice before making any arrangements regarding the treatment of your estate. There may also be social security or tax implications for your potential beneficiaries.

LGIAsuper is here to help you. Contact us on 1800 444 396 to talk through your options and have your questions answered.