Navigating the distribution of superannuation death benefits can be complex, especially when no binding nomination form is in place. A binding nomination is essentially a legal directive that specifies who should receive your superannuation funds in the event of your death. Without it, the process of claiming superannuation benefits becomes more complicated, often adding stress during an already challenging time.

Here’s a look at what happens when there’s no binding nomination and what that could mean for families and dependants.

How Superannuation Death Benefits Are Decided

When a superannuation member passes away without a binding nomination, the trustee of the fund steps in to determine who will receive the death benefits. Trustees follow the fund’s rules and relevant regulations, such as the Superannuation Industry (Supervision) Act. Typically, this means the death benefit may go to the member’s legal personal representative (executor) or their dependants.

Without a binding nomination, however, the trustee has discretion over the decision. They will assess who was financially dependent on the deceased or, in some cases, who may have had a close relationship, even if it wasn’t financial. This can include children, partners, or anyone classified as a dependant under the fund’s rules.

Who Counts as a Dependant?

The term "dependant" in the context of superannuation isn’t always straightforward. A dependant could include a spouse, de facto partner, children, or anyone with whom the deceased shared a close relationship and provided support, such as an adult child, sibling, or even a friend if they can prove dependency. In some cases, a family member or partner who was financially dependent will have a stronger claim, but other factors, like shared domestic arrangements or significant emotional support, can also play a role in the trustee’s decision.

Each superannuation fund may have different definitions and requirements for who qualifies as a dependant, making it all the more important to understand the fund’s specific rules. For instance, a spouse may need to prove cohabitation or financial dependency, and relationships like de facto partnerships may require additional documentation, such as proof of living arrangements.

When a Nomination is Invalid or Lapsed

Even if a nomination was made, it might not hold up if it doesn’t meet the fund’s formal requirements. For example, some funds require nominations to be renewed every three years, meaning that an outdated nomination might not be legally binding. A nomination may also be considered invalid if it wasn’t submitted in the correct format or was made under duress or without full legal capacity.

For families dealing with the aftermath, this can be challenging. While they might believe that the deceased’s intentions were clear, the fund’s rules or a simple lapse in paperwork may override those intentions.

The Role of Trustees in Dividing Benefits

Once the trustee identifies potential dependants, they assess each individual’s degree of financial or emotional dependency on the deceased. This step isn’t always quick; trustees often take time to gather documentation, such as proof of shared expenses or living arrangements, to justify their decision.

For instance, trustees might award a higher share of benefits to young children or financially dependent spouses, while adult children or non-dependent partners might receive less or none at all. Trustees also consider the purpose of superannuation benefits—to support those who might reasonably have relied on the deceased for future financial support.

What to Do if You Disagree with the Trustee’s Decision

If you feel that a trustee’s decision is unfair or unreasonable, you have options. The Australian Financial Complaints Authority (AFCA) allows beneficiaries to challenge decisions if they can show that the trustee acted improperly. For instance, if a trustee overlooked critical documentation or made a decision without fully considering a dependant’s circumstances, the claimant can make a complaint to AFCA within 28 days of the trustee’s decision.

AFCA’s role is to review the decision and assess if it was “fair and reasonable” in the context of the specific circumstances. They can uphold the decision, modify it, or require the trustee to reconsider the matter.

Why Planning Matters

While it’s possible to navigate superannuation benefits without a binding nomination, having one in place can reduce the uncertainty and potential disputes that might otherwise arise. Making or updating a binding nomination can ensure that your wishes are clear and legally enforceable, sparing loved ones the added stress of navigating these rules.

For families dealing with this situation, understanding the role of the trustee and knowing your rights is essential. The process may feel impersonal, but each decision is meant to honour the deceased’s intent to support their loved ones, even if the trustee’s choices aren’t always easy to understand.

Contact New South Lawyers today to secure your representation and approach your case with confidence.