Superannuation - Binding Death Benefit Nominations

Assets within a superannuation fund will not form part of a person’s estate on their death, unless the trustee of the superannuation fund makes a determination to pay the proceeds of the superannuation fund to the estate.

As part of a person’s “estate plan”, it may be appropriate for that person to direct the fund trustee to deal with the superannuation proceeds in accordance with directions set out in a nomination form, which is akin to a “will” for the superannuation fund.  Such forms are called “Binding Death Benefit Nomination” forms (“BDBN”) and, if prepared properly and in accordance with the requirements of the fund’s trust deed, have the effect of removing any discretion which the fund trustee may otherwise have in determining how superannuation death benefits are to be paid.

As time passes, more cases are emerging in the civil courts and in the Superannuation Complaints Tribunal on the adequacy (or otherwise) of BDBNs.

From these cases, the following issues emerge:

  • With respect to a self-managed super fund (SMSF), the BDBN should comply with any requirements which may be set out in the trust deed which established the SMSF.
  • Care must be taken to ensure that a BDBN does not lose its “binding” status as a result of the passage of time.
  • If it is desired that the person’s estate is to be the recipient of the superannuation death benefits, then the nominee on the BDBN form should be the “legal personal representative” of the member, a term found and defined in the legislation which governs superannuation funds.
  • The nomination should not refer to persons who do not fall within the range of people who can receive superannuation assets under superannuation legislation.
  • Often there is a need for nomination forms to be regularly updated.

Given the large amount of funds invested in superannuation in Australia, it is an integral part of a person’s “estate plan” to ensure that their superannuation death benefits are dealt with in accordance with their wishes, and that those wishes comply with the relevant legislation.

Clelands are equipped to provide the relevant advice in order to ensure that a person’s intentions with respect to superannuation benefits are honoured and not thwarted.

 

Charles Beresford

19 April 2017