Members concerned about what will happen to their superannuation upon their death need to consider who will be in control of their SMSF under their current trust structure, in addition to ensuring they have a binding death benefit nomination (BDBN) in place, an SMSF technical expert has said.
SuperConcepts SMSF technical support executive manager Nicholas Ali noted BDBNs were only a partial solution for members seeking to ensure their intended beneficiaries were not left empty-handed, pointing out an SMSF trust structure and whoever had control of the SMSF upon the member’s death was also crucial.
“Really, a BDBN is only a piece of paper and it can be disregarded by the trustee of the fund because the trustee controls the fund,” Ali said.
“Yes, you need a BDBN, it’s a very important document, but probably even more important is who controls the fund on your passing.
“[More important to having a BDBN] would be control of the fund and trustee structure, individual trustees versus a corporate trustee.”
In addition, he highlighted the long-term benefit of having a corporate trustee rather than individual trustees, especially when faced with significant changes to the governance of a fund due to death or divorce.
Having a company as a trustee would lessen the administrative burden for the remaining directors as removing a director following their death or because of a divorce would be a less convoluted process than removing a trustee, he noted.
“We would always say have a corporate trustee as a general rule for a whole range of reasons,” he said.
Recently, Cooper Grace Ward partner Hayley Mitchell pointed out the issue of whether a BDBN directing superannuation benefits away from an estate could be made by someone holding an enduring power of attorney for an SMSF trustee appeared to remain unsettled in case law across the states.
In November, DBA Lawyers senior associate William Fettes said SMSF trustees should go through a claim-staking process in relation to death benefits to avoid any suggestions of failing to exercise discretion when paying those benefits without the direction of a binding nomination.
