In setting up and running a Self Managed Superannuation Fund (“SMSF”), its important to ensure that you have the key ingredients to success including financial advice, Trust Deed and an Investment Strategy. However, what about death and incapacity, how can you take care of your loved ones?
In a ‘Will,’ we outline our wishes for the distribution of our personal assets should we pass away. However, in the case of a person’s superannuation benefits, a ‘Will’ may not be sufficient when allocating our fund’s to our desired loved ones, as these benefits do not always automatically form part of the member’s estate. To give certainty over your superannuation benefits, a special “Super Will” should be created, called a Binding Death Nomination.
What is a Binding Death Benefit Nomination (BDBN)?
A Binding Death Benefit Nomination is a legally written notice given by a super fund member to the trustee of their super fund; which should be signed and witnessed. It explicitly nominates one or more of your dependants and/or legal personal representative to receive your super benefit in the event of your death.
What if I do not have a Binding Death Benefit Nomination in effect at the date of my death?
If you have not made a nomination at the time of your death, or for some reason the nomination is invalid, it is up to the discretion of the super fund’s trustee(s) to distribute your superannuation benefits to a permitted range of beneficiaries (e.g. the deceased member’s spouse and children). As such, the people nominated by the trustee to receive the superannuation death benefit could be different from the deceased member intentions.
How long can a BDBN remain in force?
A BDBN can be either lapsing or non-lapsing. A lapsing BDBN will be current for 3 years and a non – lapsing BDBN will not expire unless amended or revoked. This means, a valid non-lapsing BDBN will last indefinitely, provided that the provisions of the superannuation fund deed allow for it. The ability to make a non-lapsing BDBN is useful given that quite a few members tend to forget to update their BDBNs every 3 years.
What are the advantages of a Binding Death Benefit Nomination (BDBN)?
The deceased member’s super benefits will be distributed as per their wishes and there will be less chance of a successful challenge by a dissatisfied beneficiary.
Kate has been married twice. She had made a BDBN because she would like her current husband to receive her death benefits. If she had not provided a valid BNBN, her death benefit may have been paid to her legal personal representative or by the instruction of her current trustees of her superfund, her benefit could have been challenged or contested by the husband of her first marriage.
What are the disadvantages of a Binding Death Benefit Nomination (BDBN)?
A valid BDBN will remain in effect even if there is a change in your personal circumstances such as a marriage or a divorce. It is therefore important that your review and amend your BDBN regularly in order to have the BDBN accurately reflect your wishes.
Disclaimer – The content has been prepared by Redwood Wealth Pty Ltd & Redwood Advisory Pty Ltd without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice. This article should not be considered personal financial advice as it is intended to provide factual information only.
Ivan Filipovic is an authorised representative of First Mutual (AFSL 423710). Redwood Wealth is a Corporate Authorised Representative of First Mutual (1244359)