When my friend Tom died at 41, his super balance was $340,000 and his life insurance through the fund paid out another $750,000. The will named his wife as sole beneficiary of his estate. The super and the life insurance, together $1.09m, did not go to her.
They went to his mother. Tom had filled in a non-binding nomination when he started the fund at 23. He'd never updated it.
This is the most expensive paperwork mistake Australian men make.
Why super doesn't pass through your will
Superannuation is held in trust. The fund's trustee, not you, owns the money technically. When you die, the trustee decides who gets it. They'll look at your nomination first, but if the nomination is invalid, expired, non-binding, or missing, they fall back to their own discretion.
The will doesn't override the trustee.
Same for life insurance held inside super (which is how 80 percent of Australian fathers hold it).
The three kinds of nomination
1. Non-binding nomination. A suggestion to the trustee. The trustee considers it but isn't obliged. Most super funds default new members to non-binding. This is what most men have on file.
2. Lapsing binding nomination. A legally binding instruction to the trustee. The catch: it expires after three years. About 60 percent of binding nominations on file are expired.
3. Non-lapsing binding nomination. A legally binding instruction with no expiry. Australian Super, REST, Hostplus, Aware Super, UniSuper all have it.
The right answer for most men is a non-lapsing binding nomination.
Who can actually be nominated
Eligible beneficiaries:
- Your spouse (married or de facto).
- Your children.
- Anyone financially dependent on you.
- Anyone in an "interdependency relationship" with you.
- Your legal personal representative (i.e. your estate).
You cannot nominate your mother, father, sibling or friend directly unless they're financially dependent.
For most fathers, the cleanest answer is to nominate the spouse for 100 percent.
Life insurance: same rules, different paperwork
Inside super (most common). Premiums paid from your super balance. Cover usually $200k-$1m default. Same trap: if your nomination is wrong, the insurance goes wherever the super goes.
Stepped or level retail policy outside super. A standalone life policy. The policy itself names a beneficiary on a separate form.
Group cover through an employer. Sometimes inside super, sometimes separate.
The 30-minute task is to log into each of these and confirm the nomination is current and goes to the right person.
Why most men's nominations are wrong
1. They were set up at age 22 and never revisited.
2. The nomination was binding but lapsed. Three-year expiry on lapsing binding nominations means most are dead by the time they're needed.
3. Multiple funds, not all updated. The average Australian has 1.7 super accounts.
The 30-minute fix
- Log into MyGov. List all your super accounts.
- For each account, log into the fund's portal. Go to "beneficiaries."
- Change to a non-lapsing binding nomination if available. Name your spouse for 100 percent.
- Repeat for any standalone life insurance.
- Document the result on one page.
- Set a calendar reminder for every two years.
Tom's wife eventually got most of the money through a family provision claim, after eighteen months in the supreme court and about $80,000 in legal fees. Don't make your wife do that.
Update the form. Update it now. Set the reminder.
Further watching
- 01Super and life insurance don't pass through your will. The fund's trustee follows the nomination on file with the fund, not your will.
- 02Three nomination types: non-binding (a suggestion), lapsing binding (3-year expiry), non-lapsing binding (permanent). Use non-lapsing where available.
- 03Eligible beneficiaries are limited by law: spouse, children, financial dependants, interdependants, or your estate.
- 04Most men have multiple super accounts and at least one wrong or expired nomination. Use MyGov to find them all.
- 0530-minute fix: check every fund and policy, change to non-lapsing binding where possible, document on one page, calendar reminder every two years.
When you die, your super goes to: