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Death Benefit Nominations – Planning your estate

To Bind, or Not to Bind?

© 2024 First Samuel Limited

The following is part 2 of a series of articles exploring incapacity, death benefit nomination, estate planning, and deceased estates.

In Act 3 of William Shakespeare’s Hamlet, the protagonist is in a state of both grief and shock having discovered that his father has been murdered by his uncle. He considers whether he should persevere with life given this immense burden or take refuge in death. Lucky for Hamlet that he didn’t have the intricacies of superannuation and death benefits to contend with.

In our previous issue we have looked at Appointments of Medical Treatment Decisions Maker (MTDM), Advanced Care Directives (ACD), Testamentary Trusts, Private Ancillary Funds (PAF) and Enduring Powers of Attorney (EPOA). In this issue we look at superannuation death benefit nomination and consider whether such nominations should be binding upon the trustees of a superannuation fund.

Are superannuation assets part of your estate?

In short, they can be… but don’t have to be.

At law, superannuation provides a benefit for a member but is not legally owned by the member. Therefore, superannuation assets are not governed by a will. They are not automatically included as part of one’s property upon death.

Instead, it comes down to whether the trustee of the superannuation fund pays the deceased member’s ‘residual benefit’ to the estate or directly to other persons who may be named superannuation beneficiaries1.

The trustee, in most cases, will rely on the member’s ‘death benefit nomination’ (DBN) to decide. This is sort-of equivalent to a will.

  1. Which can only be the deceased member’s dependents including current or former spouse, children, or any person with whom they had an interdependency relationship. ↩︎

Can a member direct their superannuation fund on the payment?

Only where the death benefit nomination is ‘binding’ and remains valid at the date of the members passing, is there a legal obligation for the trustees of the fund to follow it (including if the personal situation of the deceased had since altered and the nomination was no longer desirable).

In all other cases, the death benefit nomination can be a guide to the trustees, or if there is no death benefit nomination the trustees have full discretion as to whom to pay the benefit.

The conventional wisdom that often prevails amongst the wider financial advice industry is that members ought to make binding DBNs and ensure that they are renewed every 3 years to make certain they remain valid.

Circumstantial considerations

As in Hamlet, we find there can often be relationship complexities to explore, the understanding of which will determine whether a nomination ought to be binding or not.

Depending on those complexities, nomination flexibility may be a more desirable commodity in certain situations.

For example, in SMSFs with an uncomplicated family with amicable, clearly understood and documented estate planning wishes, it may often be preferrable to leave flexibility to the surviving family members if they become trustees. Discretion may also be given to the executor.

The reasons include providing flexibility:

  • in structuring and tax-planning opportunities
  • to consider issues that might arise between nomination and passing
  • where a spouse or dependent child pre-deceases

Conversely, some situations may warrant a prescriptive approach and the use of a binding death benefit nomination. For example:

  1. In situations of insolvency;
  2. Where there is a strong possibility of a potential challenge against an estate; or
  3. If there are potential issues with entrusting capital to a particular intended beneficiary.

(Note: for NSW residents this is not without its challenges).

Technical considerations

Although binding death benefit nomination have been around for near on 25 years, case law continues to evolve. An important outcome of which is that the adequacy of wording within the fund’s trust deed is as important as the validity of the nomination being made.

Additionally, if the member has in place a pension which automatically reverts to the member’s spouse, it must be ascertained whether the DBN (binding or not) takes precedence.

Lastly, for most SMSFs, unless its deed prescribes, the renewal of a binding DBN does not need to be undertaken every three years, it remains binding unless revoked. The trap is therefore to be aware of changing intentions and to amend any binding DBN accordingly.


It is important to have open conversations with your Private Client Adviser about your estate planning intentions. This includes any concerns, tricky relationship situations, and any subsequent changes. Only then can considered and tailored solutions be developed that are well suited to achieving your intended estate planning outcomes.

Returning to Hamlet, it is likely that neither a binding or non-binding DBN would have ultimately done Prince Hamlet any good. This is because all those with whom he had a relationship of dependency pre-deceased him. Equally, his father (the late King Hamlet) would have been well advised to have had a binding DBN to his son (also Hamlet) given the custom at the time (estates passed to the next in line, in this case his brother and prince Hamlet’s uncle (King Claudius) who had in fact killed the King Hamlet… the rest is silence.

The information in this article is of a general nature and does not take into consideration your personal objectives, financial situation or needs. Before acting on any of this information, you should consider whether it is appropriate for your personal circumstances and seek personal financial advice.

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