A Binding Death Nomination directs the Trustee of the superannuation fund where to pay the death benefit. In most states and territories in Australia, the nomination is ‘binding’ on the Trustee and takes away their discretion to decide where the death benefit is to be paid.
While superannuation death benefits may not form part of the estate, the Court in NSW has the power to bring back into the estate of a deceased person any superannuation paid out from a Binding Death Nomination and designate these funds as “notional estate”. The Court then has the power to use those funds to pay a distribution to an applicant seeking provision from the estate if the actual estate cannot cover the provision ordered.
The effect being that the nomination isn’t really binding after all in NSW.
What is a Notional Estate?
The basic premise of the Notional Estate has become increasingly relevant now that more and more people hold their personal assets in trusts and super funds. The reason people have previously done this is to try and avoid the Family Provision rules by moving assets outside their Actual Estate. This means the Actual Estate has potentially little to no value or assets for Family Provision, as they have all been accounted for in a Notional Estate.
What this means for you
If an eligible claimant against a Will (within the Succession Act 2006 (NSW)) believes they have not been adequately provided for, their claim is no longer limited to the Deceased’s Actual Estate. It now also takes into account the Deceased’s Notional Estate if the Actual Estate is insufficient to provide for the successful claimant.
There are, however, four circumstances when property and assets may be seen as notional estate:
- if the relevant property transaction takes effect at time of death. This includes property held in joint tenancy, sole name by survivorship, life insurance and superannuation;
- if the relevant property transaction takes effect within 1 year before death and was entered into when the deceased had a moral obligation to make adequate provision, by Will or otherwise, for the proper maintenance, education or advancement in life of an eligible person which was substantially greater than the moral obligation to enter into the transaction;
- if the relevant property transaction takes effect within 3 years before the date death and was entered into with the intention, wholly or partly, of denying or limiting provision being made out of the estate for the maintenance, education or advancement in life of any person who is entitled to apply for a family provision order. This covers deliberate structuring to defeat family provision claims; and
- if the estate has been distributed.
Contact Shine Lawyers
There is still merit in having a Binding Death Nomination in place; good estate planning is essential to ensure your affairs are in order and to the law.
It is important to obtain legal advice in relation to estate planning and our team of Wills and Estate law experts are on hand to take you through the steps of ensuring your affairs are all in order. Get in touch today for a confidential, no-obligation consultation.
Written by Shine Lawyers. Last modified: October 16, 2019.