People using a binding nomination to make sure their superannuation death benefits end up in the right hands need to be aware of some potential traps.

Generally, the trustee of a superannuation fund has absolute discretion to decide who should receive a member's death benefits. But by using a binding nomination you, rather than the trustee, can specify who should receive the benefits.

This should give you more control but it will be effective only if it is used properly.

Louise Biti, national research and technical manager at ING, says: "Binding nominations sound like the simplest way of ensuring your wishes are carried out and many super products are using them as a key selling point; however, people need to be aware they have a number of limitations."

They are only valid if the nominated person is a dependant when you die or is your estate.

"For superannuation purposes, a 'dependant' is somebody you are financially responsible for your spouse, de facto spouse, children and anybody who is financially dependent on you, which could include a same-sex partner," says Biti.

It is important to realise that the amount of tax payable will depend on who receives the superannuation death benefits, she says. "There may be no tax if the death benefit is paid to financial dependants, but up to 16.5 per cent tax could be deducted if paid to non-financial dependants."

The amount of tax payable will also depend on whether there are any excess benefits an amount that exceeds the reasonable benefit limit. Excess benefits will be taxed at 48.5 per cent (including Medicare) whether the beneficiaries are financial dependants or not.

You can minimise tax on excess benefits by ensuring beneficiaries receive it as an income stream, especially if their marginal tax rate is lower than 47 per cent.

If super benefits are paid as a lump sum into your estate, the tax on earnings from the lump sum can be minimised by using a testamentary discretionary trust to split it among a number of beneficiaries.

However, Paul Prindable, national estates and trusts product manager at Perpetual Private Clients, says nominating your estate can undermine one of the advantages of a binding nomination that super benefits are able to pass outside the estate administration system.

Rather than taking seven months to two years to be dealt with through the probate system, super benefits may be handed over to the nominated beneficiary within a month of the death, he says.

That can be a huge reprieve for a spouse who has been left "virtually destitute" because the deceased had control over their assets, he says.

The other issue to take into account with a binding nominations is that it must be renewed every three years to remain valid. "In general, it is the requirement to review the nomination every three years that can become problematic," says Biti. "If the person forgets or has lost the ability to make decisions then the nomination may not be enforceable."

Similarly, the binding nomination also needs to reflect your current views on who should receive your death benefits and that may require more frequent changes.

If a nomination is not enforceable, the benefits will go to the estate, says Prindable.

For that reason, he suggests, people should still include super benefits in their will.

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