SMSF advisers and trustees must be guided by the most recent fund trust deed available when determining the validity of a binding death benefit nomination (BDBN) after a deed amendment, according to a specialist lawyer.
Practitioners felt clarification in those circumstances had become more urgent as deed updates had in some cases been performed by a new service provider, as evidenced when Bartier Perry executive lawyer Lisa To was asked for her guidance on the topic at the recent SMSF Association Sydney chapter breakfast.
“[In these situations] I look at all of the documents and what prevails and what is paramount,” To said.
“Reading the current deed is most important. Don’t worry about the previous deed.
“So I would read the current deed – just the relevant provisions about change of trustees and death benefits, because they’re the two main clauses that deal with this.
“Then I would look at the binding death nomination and the date, and if it complies with the deed.
“If I think there is a need to update the nomination I will, but if it’s in accordance with the deed and everything else, I’ll leave it.
“Then I’d look at the pension, because sometimes the pension overrides this as there may not be an asset.”
She said those types of scenarios were becoming more commonplace as SMSF trustees found it convenient to replace the super fund deed when necessary.
In regard to the BDBN, she clarified that the rules applying when the nomination was made were those to take into account.
“But you have to refer to the latest rules in place, because you can have a deed that was formulated later than the nomination, and it depends on the nomination,” she said.
She pointed out in some scenarios it might be easier to amend the deed to fall in line with the BDBN.
“Some nominations now specify if it’s lapsing or non-lapsing, and some nominations are so detailed they actually deal with the deed provisions,” she explained.
“So it’s not uncommon in some situations just to amend the deed.”
