Superannuation death benefit nominations in Victoria.

Superannuation is not owned by you the way your bank account is. It is held in trust by your fund, and when you die the trustee decides who receives it under the fund's rules. Your will does not control it unless you have taken a specific step to send it there.

That step is a valid binding death benefit nomination. Without one, or with one that is invalid or out of date, the fund trustee makes the decision, and it may not be the one you would have made.

Most binding nominations expire, generally after three years, unless the fund allows a non-lapsing one. A nomination you signed and forgot about may no longer bind anyone, which quietly hands the decision back to the trustee.

In one well-known case a man who was the last surviving trustee of the couple's self-managed fund paid his late wife's entire death benefit to himself, against her wishes, because her binding nomination had lapsed. The family had no recourse. A nomination is only as good as its validity on the day it is needed.

Whether your benefit should go to your estate or directly to a dependant, and whether a nomination should be binding, lapsing or non-lapsing, depends on your family and your tax position. It is a decision worth making deliberately, not left to a form in a drawer.

Super death benefits are only tax-free when they are paid to a dependant the tax law recognises, and that group is narrower than most people assume: broadly a spouse, a child under 18, someone who was financially dependent, or a person in an interdependency relationship. Pay a benefit to an independent adult child and a significant share can be lost to tax.

There are ways to structure around this, including directing the benefit through the estate or a superannuation proceeds trust, but only if it is planned in advance. We look at your super as part of the estate, not as an afterthought.