Why you need to think about your beneficiary
It’s important you nominate a beneficiary, as this tells your insurer or super fund who you want to receive your benefits in the event of your death.
Making sure your benefits go to the right person
A beneficiary is anyone who receives a payout from your Life Cover policy or superannuation when you die. When you nominate a beneficiary, this advises your insurer or super fund who you’d like to receive your benefits in the event of your death. So, it’s pretty important.
Nominating a beneficiary also makes it easier for your loved ones to access any payout they may be eligible for, which will help them remain financially protected during a difficult time.
Who can I choose to be a beneficiary?
The rules around who you can nominate as a beneficiary depend on whether your assets are held inside or outside of superannuation.
Outside super
You can choose anyone – family, friends, your estate, or even a trust.
Inside super
You’re limited to your spouse, children (of any age), financial dependants, someone you have an interdependency relationship with, or legal personal representative.
You can learn more in this article about choosing your beneficiaries and how to nominate them.
What happens without a valid nomination?
How your death benefit is treated if you don’t have a valid nomination also depends on whether your policy is held inside or outside of super.
Outside super
Your benefit goes to your estate and is distributed according to your will – or intestacy laws if you don’t have one.
Inside super
The trustee decides how to distribute your benefit, which may not align with your wishes. They may choose to pay it directly to your dependants, or your estate, in any proportion they see fit.
Trustees base their decision on a number of factors. These include the deceased member’s wishes (in the case of a non-binding nomination), the law, and the trust deed of the super fund. This process can be a lengthy one and won’t necessarily deliver the outcomes you would have wanted.
The importance of having a valid Will
A Will is a legal document that outlines how you want your assets distributed after your death. If you die without a Will, it’s called dying intestate. In that case, your assets will be distributed according to the intestacy laws of your state or territory, which might not reflect your wishes.
This poses some risks, including:
your assets not being distributed according to your wishes
your loved ones having to go through a lengthy and expensive legal process, and
the potential for arguments among your beneficiaries over their claim on your estate.
If you want to avoid these risks, you should consider making a Will. You can do this yourself or with the help of an estate-planning solicitor. It’s a good idea to regularly review your Will to make sure it remains up to date and reflects your wishes.
It’s also important to note that insurers and super fund trustees aren’t obliged to consider your Will when determining death benefit payments. They will consider a non-binding nomination but will follow the instructions of a valid binding nomination.
That’s why nominating a beneficiary is crucial to ensuring your loved ones are protected.
Ensure the right people get your insurance benefit
Life changes; marriage, divorce, children. Review your beneficiary regularly to make sure it is still valid and reflects your wishes.
Your Vision Financial Solutions Pty Ltd ABN 64 650 296 478 and its Advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This article has been prepared without taking into account your personal objectives, financial situation or needs.