A leading SMSF legal expert has implored advisers to consider the outcome of what a binding death benefit nomination (BDBN) is being put in place to achieve rather than just looking at the exercise as a mere formality.
“Death benefit nominations should not be just form filling. They should be part of a client’s proper estate planning,” Townsends Business and Corporate Lawyers principal Peter Townsend said.
“Death benefit nominations should never be considered without reference to their will and the way in which the nomination and the will fit together.”
Townsend emphasised when putting a BDBN in place the trust deed was a most critical element.
“A BDBN is simply a nomination by a member to the trustee advising the trustee to whom the member wants their death benefit paid,” he said.
“The only requirements are one, that the nomination is in accordance with the funds rules, and two, that the person nominated be an eligible death benefit recipient.
“It therefore comes back to the trust deed. There are no specific processes, Hail Marys, forms, et cetera that apply in this area as long as those two requirements are met.”
He said a proper BDBN remained the most effective way to ensure superannuation death benefits were allocated correctly as it could not be overridden by a general will.
“Currently the ATO (Australian Taxation Office) determination (SMSF D 2008/3) says the payment of death benefits from a superannuation fund is determined in accordance with the governing rules of the superannuation fund and not in accordance with the terms of the deceased member’s will,” he said.
“So it is not the will that people must look for in terms of what is going to happen to their superannuation, it is the nomination.”
Without a proper nomination it was trustee discretion that determined to whom the superannuation death benefits went and not the will, he said.
