Making sure your benefits go to the right person
A beneficiary is a person or entity who may choose to receive a payment from your life insurance policy or Superannuation when you die. When you nominate a beneficiary, this advises your insurer or super fund who you would like to receive your benefits in the event of your death. So, it’s pretty important.
Nominating a beneficiary can also make it easier for your loved ones to understand what may happen to any payout they are eligible to receive. This can help reduce uncertainty at an already difficult time.
Who can I choose to be a beneficiary?
Assets held outside superannuation: You can choose anyone – family, friends, your estate, or even a trust.
Assets held Inside superannuation: The rules are more limited. You can generally nominate your spouse or de facto partner, your children, someone who is financially dependent on you, someone in an interdependent relationship with you, or your legal personal representative (the executor of your will).
Speak with your financial adviser or super fund if you are unsure.
What happens without a valid nomination
How your death benefit is treated if you don’t have a valid nomination also depends on whether your policy is held inside or outside of super.
Outside super: Your benefit goes to your estate and is distributed according to your Will – or intestacy laws if you don’t have a Will. Inside super: The trustee of the Super fund decides how to distribute your benefit, which may not align with your wishes. They may choose to pay it directly to your dependents, or your estate, in any proportion they see fit.
The Trustees of your Superannuation Fund base their decision on a number of factors. These include the deceased member's wishes (in the case of a non-binding nomination), the law, and the trust deed of the super fund. This process can be a lengthy one and won’t necessarily deliver the outcomes you would have wanted.
The importance of having a valid Will
How your death benefit is treated if you don’t have a valid nomination also depends on whether your policy is held inside or outside of super.
Your beneficiary nomination helps guide who receives your insurance or superannuation death benefit, while your Will explains how you want your estate to be distributed. Having both in place can help reduce delays, uncertainty and disputes for the people you care about.
A Will is a legal document that sets out how you want your estate to be distributed after your death. If you die without a Will, it’s called dying intestate. Your estate will then be distributed under the intestacy laws in your state or territory, which may not reflect your wishes.
This poses some risks, including:
- your assets not being distributed according to your wishes
your loved ones having to go through a lengthy and expensive legal process, and
the potential for arguments among your beneficiaries over their claim on your estate.
If you want to avoid these risks, you should consider making a Will. You can do this yourself or with the help of an estate-planning solicitor. It’s also a good idea to regularly review your Will to make sure it remains up to date and reflects your wishes.It’s also important to note that insurers and super fund trustees aren’t necessarily obliged to consider your Will when determining death benefit payments. They will consider a non-binding nomination but will follow the instructions of a valid binding nomination.
That’s why nominating a beneficiary is crucial to ensuring your loved ones are protected.
Life changes – marriage, divorce, children. Review your beneficiary regularly to make sure it still reflects your wishes.