6 common beneficiary mistakes
Here are six common mistakes people make when nominating beneficiaries and how to avoid them.
1. Not nominating any beneficiaries
Perhaps the biggest mistake you can make with your beneficiaries is to not nominate any!
In super, beneficiaries are the people you want to receive your death benefit if you pass away. This includes any super left in your account plus any insurance benefit attached to it.
By nominating beneficiaries, you tell the Trustee (the legal entity responsible for managing the Spirit Super fund) who you’d like to get your death benefit and how much they should receive.
This is important because super is not automatically included in your will and is handled separately from your other assets, such as your home, savings, and other investments.
If you pass away without nominating beneficiaries, it’s up to the Trustee to decide who gets your death benefit when you die.
By nominating beneficiaries, you have more influence over where your death benefit goes.
2. Making the wrong type of nomination
You can make two types of beneficiary nominations: binding or non-binding. Which option is best for you will depend on your personal situation and how much control you want over where your super goes when you pass away.
If you want complete control of who gets your death benefit, a binding nomination is your best bet.
Under a binding nomination, the Trustee is legally obliged to pay your death benefit to your nominated beneficiaries (assuming it’s a valid nomination — see mistake 3 below).
You also decide exactly how your death benefit is divvied up by nominating what percentage each beneficiary receives.
Binding nominations provide more certainty about your wishes and can provide essential clarity if your personal situation is more complex. This includes if you’ve been married multiple times or have kids from previous relationships.
If you only want to make your wishes known to the Trustee, then a non-binding nomination may be enough.
Under a non-binding nomination, you nominate who you’d prefer to get your death benefit. However, it’s ultimately up to the Trustee to decide who gets your death benefit and how much.
Of course, the Trustee is guided by super laws and will try to ensure your death benefit goes to the appropriate people — such as a spouse, child, or other financial dependants — but the outcome may not be exactly what you wanted.
While this option may seem limited, a non-binding nomination is better than no nomination. It ensures the Trustee considers your wishes when deciding where your hard-earned super should go.
Binding vs non-binding nomination at a glance
3. Nominating ineligible beneficiaries
While you have the right to nominate beneficiaries, it doesn’t mean you can nominate anyone!
For a binding nomination to be valid, you need to nominate either a dependant or a legal representative. For super purposes, dependants include:
- your spouse or partner
- your children of any age, including natural, step or adopted children
- any person who is financially dependent on you
- any person you have an interdependent relationship with
If you nominate a legal representative (usually the executor or administrator of your estate), they will distribute your death benefit according to your Will.
The same rules apply to non-binding nominations. However, there’s slightly more flexibility.
For example, if you have no financial dependants or spouse and nominate a parent or sibling, they may be considered a potential beneficiary. However, the Trustee will always prioritise dependants where they exist.
4. Not witnessing the form correctly (binding nomination only)
To make a binding nomination, you need to fill out a binding nomination form, sign it in front of two witnesses (they also need to sign), and send it back to us.
For your nomination to be valid, your witnesses must:
- be over 18 years of age
- can’t be a nominated beneficiary
- must witness, date and sign the form at the same time you sign it
If your witnesses don’t sign and date the form when you do, your nomination will be invalid. Any future death claims will be assessed as if no nomination was made.
5. Letting your nomination get out of date
Life happens. People get married (and divorced). Kids are born and grow up. Relatives pass away. So, it’s important to keep your beneficiaries up to date to reflect your current situation and financial obligations.
For binding nominations, you need to update your beneficiaries at least every three years. You can also update, change or cancel your nomination anytime.
If your nomination expires, any future death benefit claims will be assessed if you made no nomination.
Non-binding nominations never expire and can also be updated, changed, or cancelled anytime through Member Online.
Regardless of the nomination type, you should review your beneficiaries regularly. Significant events such as births, deaths, and marriages (and divorces) are a good time to double-check everything is in order.
6. Not telling the people you’ve nominated
Before any death benefit claim can be processed, we need to receive a certified death certificate. Usually, this is provided by your beneficiary.
So, let your beneficiaries know you’ve nominated them and let them know how to contact us to make a claim if they need to.
Losing a loved one is never easy and often comes with a lot of stressful paperwork. You can help lighten this burden by making sure everyone starts the process on the same page.
More info about beneficiariesFor more details about nominating beneficiaries, see Nominate who gets your super or read the Nominating your beneficiaries fact sheet.
Advice on Spirit Super is provided by Quadrant First Pty Ltd (ABN 78 102 167 877, AFSL 284443) and issuer is Motor Trades Association of Australia Superannuation Fund Pty Ltd (ABN 14 008 650 628, AFSL 238718), the trustee of Spirit Super (ABN 74 559 365 913). Consider the PDS and TMD at spiritsuper.com.au/pds before making a decision. A copy of the Financial services guide for Spirit Super Advice is available at spiritsuper.com.au/financial-services-guide.
This is for general information only and doesn’t take into account your objectives, financial situation or needs. You should assess your financial position, personal objectives and needs before making a decision based on this information.