Estate Planning

Periodic BDBN updates prudent


It is a prudent for advisers and their SMSF clients to periodically update any binding death benefit nominations they may have in place.

Binding death benefit nominations (BDBN) should not be seen as a set-and-forget estate planning measure and conducting a periodic update of these instructions can protect the relevant member’s wishes upon death from errors and the impact of other SMSF procedures.

“It’s a good thing to update a BDBN because when you’re updating it you just might be getting an error of the past right,” Coleman Greig principal lawyer Peter Bobbin told delegates at the recent Chartered Accountants Australia and New Zealand SMSF Conference 2021.

“And if you’re updating a trust deed does it mean that the old BDBN is now wrong? Even if you’re updating to the same super fund deed supplier who uses the same format, does that mean that the old BDBN is actually out of date?

“If that’s your style of approach, I recommend, minimum, that you just update the BDBN every couple of years anyway because it indicates to the court and everybody at large what the person’s wishes were.”

He suggested the easiest approach for trustees to take might be to update their BDBN at the same time they update the fund’s trust deed.

According to Bobbin, implementing this type of SMSF administrative discipline is recommended due to the legal nature of BDBNs compared to a person’s will.

“If there is a mistake made in will law, the courts actually have the power to rectify it,” he noted.

“The executor and the beneficiaries have the power to go to the court and say: ‘Hey court, there is a mistake [in the will] over here, but here’s all my reasons and evidence and affidavit as to what the true intent of the testator was.’

“And the court can say: ‘Yep, no worries, I like what you’ve written, I believe you, I’m now going to correct the will.’

“You can’t do that with a BDBN. They are either 100 per cent right or 100 per cent wrong [and that can be] in only the tiniest of ways.”

He also took the time to suggest advisers provide their clients with an estate planning call to action to mitigate any court challenge liability they may face in the future.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital