You have a will. You paid a solicitor to draw it up, it says the house goes to your partner and the rest is divided between the kids, and you have felt quietly organised ever since. Then someone at work mentions that when their mother died, her super did not go where her will said it should. There was a fight about it. It took the best part of a year.
They are not confused, and they are not unusual. Superannuation is not part of your estate. Your will controls your estate. So unless you have taken one specific step, your will has no say at all over what is often the second-largest asset you own.
Why your super sits outside your will
Your super is held in a trust, run by the trustee of your fund, for your benefit. When you die it does not automatically become part of the pile of assets your executor distributes. It stays where it is, and the trustee decides where it goes.
That decision is made by people who never met you, working from whatever is on your file. If you have told the fund what you want, in the right form, they generally have to follow it. If you have not, they make their own call between the people who could be eligible — and that is where the eleven months and the family argument come from.
The good news is that the fix is a single form, it is usually free, and most funds now let you do it online in about ten minutes.
The four kinds of nomination, in plain English
Funds offer different versions, and the names matter more than they look.
A non-binding nomination tells the trustee your preference. They will take it into account. They do not have to follow it. Many people have one of these and believe it is watertight. It is not.
A binding nomination obliges the trustee to pay as you have directed, provided the nomination is valid and the person you have named is eligible. This is the one most people actually want.
Binding nominations come in two flavours. A lapsing binding nomination expires unless you renew or update it every three years. A non-lapsing one does not expire, though not every fund offers them. If you signed a binding nomination when you changed jobs in 2019 and have not touched it since, there is a real chance it has quietly lapsed and your fund is back to using its own discretion.
A reversionary nomination applies once your super has become an income stream: your nominated person simply keeps receiving the payments instead of getting a lump sum. In some cases it cannot be changed once set, so understand it before you tick the box.
Who you are actually allowed to name
You cannot leave your super to just anyone. The list is short: your current spouse or partner, your children of any age, someone in an interdependency relationship with you, anybody who was financially dependent on you when you die, and your legal personal representative, which means your estate.
That last option is the bridge between the two systems. If you nominate your estate, the money is paid to your executor and then distributed according to your will. For blended families, or for anyone whose wishes are more complicated than "everything to my partner", this is often the cleanest way to get your super and your will pointing in the same direction.
Notice who is not on the list. Not your brother, not your best friend, not a grandchild you have been helping unless they were genuinely financially dependent on you. Naming someone ineligible can invalidate the whole nomination.
The tax question that catches families out
Here is the part that surprises people, and it is worth knowing before you decide who gets what.
Super death benefits are taxed differently depending on who receives them. For tax purposes, a dependant is your spouse or former spouse, a child under 18, someone in an interdependency relationship with you, or someone financially dependent on you. If a lump sum goes to one of those people, the Australian Taxation Office (ATO) does not tax the taxable component at all.
An adult child who has a job and a mortgage of their own is not a tax dependant. If a lump sum goes to them, the taxed element of the taxable component is taxed at up to 15 per cent, with the Medicare levy on top. Any untaxed element, which commonly arises when a life insurance payout inside super is part of the benefit, is taxed at up to 30 per cent plus the Medicare levy. The tax-free component is always tax free.
Put numbers on it. A $400,000 super balance that is entirely a taxed element, left to a financially independent adult daughter, could attract around $60,000 in tax before the Medicare levy is added. The same money paid to a surviving spouse: nothing.
There is also a difference between paying a benefit directly to a person and paying it through your estate: the ATO's rates for a benefit paid to an estate for non-dependants are 15 per cent and 30 per cent, without the Medicare levy added. Not a reason to reorganise everything, but a real difference worth raising with an adviser.
What to do, and what if you are behind
None of this needs a weekend. Log into each of your super funds and find the beneficiary section. For each one, write down three things: is there a nomination at all, is it binding or non-binding, and when was it signed. If it is a lapsing binding nomination more than three years old, it has almost certainly expired.
Then ask whether it still reflects your life. Nominations made before a marriage, a divorce, a new partner or a child are the ones that cause the most damage. A binding nomination naming a former spouse will generally be followed, because it is binding, and that is exactly the problem.
If you have no nomination anywhere, you have not lost anything. Nothing has happened yet. You simply have a job to do — and it is one of the highest-value hours of paperwork available to anyone in their forties or fifties, because it costs nothing and removes a genuine risk to the people you care about.
Two things to watch. If your affairs are at all complicated — a blended family, a business, a child with a disability — get advice before you sign rather than after; the interaction between a nomination, your will and any testamentary trust is worth an hour of a professional's time. And diarise a review every three years, or whenever something significant changes in the family. A nomination is not a set-and-forget document, however permanent the word "binding" sounds.
Noel Whittaker has written for decades that the expensive mistakes in money are rarely the exotic ones. They are the ordinary things nobody got around to. This is one of them.
If you want the whole picture in one place, Wills, Death & Taxes Made Simple by Noel Whittaker covers wills, estates, superannuation death benefits and the tax that applies when assets change hands, written for people who are not lawyers. It's $22.95, you buy direct from the author, and you get both PDF and EPUB.
This article is general information only and doesn't take account of your personal circumstances. Figures are current at time of writing and change each financial year. Consider seeking advice before acting.