SMSF trustees and their advisers must ensure any binding death benefit nominations (BDBN) remains consistent with their fund’s trust deed to reduce the risk of it being challenged, according to an SMSF technical expert.
Speaking during a webinar today, SuperConcepts technical and private wealth executive manager Graeme Colley said a BDBN within an SMSF could be redundant if it was inconsistent with the trust deed.
Colley said a mismatch between key documents meant nominations were vulnerable to being challenged, particularly when trustees did not pay attention to the source of the nomination.
“The trust deed itself may include an attachment of the binding death benefit nomination which links with the trust deed,” he said.
“The deed might say something like ‘a binding death benefit nomination in accordance with schedule one of this trust deed is required to be completed by a member of the fund if they wish to make a binding nomination’.
“So anyone who’s gone to the web, grabbed [a BDBN] and puts it with the fund documents may end up with a nomination that gets challenged because it’s not consistent with the fund’s trust deed.”
In addition, he said in the experience of SuperConcepts, older trustees were more likely than their younger counterparts to have an inconsistent nomination inside an SMSF.
“In some older trust deeds, not necessarily ones that are relatively new such as those made in the last five or 10 years, we’ve found that in some cases the nomination is not consistent with the fund’s trust deed,” he said.
