Binding Death Benefit Nominations: why they are important in Estate Planning
When it comes to superannuation, the outcome of your beneficiaries receiving the proper benefits you allocated to them on your death is not automatically guaranteed. But with the help of a Wills & Estates lawyer and the use of a Binding Death Benefit Nomination, they can be. In South East Lawyers’ most recent blog, Director Principal Melanie Heffernan discusses superannuation and the benefits of completing a Binding Death Benefit Nomination, to secure your wishes and the outcomes of your beneficiaries. Read it below.
With more and more Australians pouring money into their superannuation to future-proof their retirement, considering how your superannuation will be paid out on your death is more important than ever. Superannuation - whether you have a self-managed superannuation fund (SMSF), industry superannuation fund, or another account - is not automatically considered an asset of your Estate. It is not dealt with on your death like your bank accounts, vehicles or property will be.
Instead, Superannuation is subject to a different legislative regime and is heavily governed by the rules of the applicable superannuation fund. Broadly speaking, the most effective, binding way to ensure that your superannuation benefits (including your account balance and any applicable life insurance) are paid to your chosen beneficiary, is to sign and submit a Binding Death Benefit Nomination (BDBN) to your superannuation fund.
This is a separate document that requires two witnesses, with most superannuation funds having standardised forms for BDBNs.In respect of SMSFs, it is important to note that BDBNs can be problematic. A careful review of the current Trust Deed for the SMSF needs to be undertaken by a lawyer to determine whether the SMSF Trust Deed allows a member to nominate a beneficiary to receive their death benefits. The review can also determine who they can nominate and what requirements must be met to make the nomination binding on the SMSF.Provided that your BDBN complies with the SMSF Trust Deed (or the industry/other superannuation fund trust deed), and nominates a valid beneficiary, the Trustee of the fund is bound to distribute your death benefits to your nominated beneficiary.
The recent 2022 High Court case of Hill v Zuda Pty Ltd confirms a long line of case law that affirms the binding nature of properly completed BDBNs, to the exclusion of disappointed beneficiaries.Meaning that it is important to consider superannuation when making your Will, to ensure that your beneficiaries are, overall, benefited in the way you would like them to be. Failing to include a BDBN as part of your Estate Planning may make result in a windfall for one beneficiary, to the exclusion of others.
When working with South East Lawyers on your Will, we help you plan for the distribution of your superannuation, offering practical advice and support. If you are wanting to begin the process of creating your Will, or need assistance from us in reviewing your Trust Deed for your Self-Managed Super Fund, get in touch with our Wills & Estates team below.