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Non-lapsing BDBNs a better estate planning option

Putting in place a binding death benefit nomination (BDBN) that does not lapse after three years should be the preferred estate planning strategy for SMSF trustees, according to a specialist superannuation educator.

Speaking at the Australian Investors Association 2016 National Conference, SuperConcepts executive manager of SMSF education David Busoli said: “With binding death benefit nominations you’ll find there are basically two types; there are ones that expire every three years and there are ones that don’t expire. I would suggest to you that you should use the ones that don’t expire.”

Having made that recommendation, Busoli advised a regular renewal of a BDBN was prudent even if it was not one that automatically became invalid.

“If you do a binding death benefit nomination which is a permanent one, I would suggest you also renew it every three years, exercising an abundance of caution,” he said at the conference on the Gold Coast last month.

“The reason I say that is because it has never been tested that a binding nomination will stand if it’s longer than three years.” 

He added he knew of lawyers in the sector who had already been arguing a BDBN that had been in place for over three years was invalid.

“They want to have a fight about this, which costs everyone money, and whether or not they’re right or wrong, the easiest way to deal with it is don’t have the fight in the first place,” he said.

A BDBN was a particularly powerful tool for SMSFs as it allowed for very complex situations to be managed in the appropriate manner, he said.

He gave the example of a BDBN that allowed the next of kin who were in line to receive the death benefit the ability to choose how they received it, having taken into account the tax situation of each beneficiary.

“You can only have that with a self-managed super fund. It’s one of the powers of SMSFs that you can do that,” he noted.

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