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Documentation, Pensions

Guardian an alternative to BDBN or pension

SMSF death benefit guardian

SMSF trustees are not restricted to binding nominations or reversionary pensions when planning to direct a death benefit and can name a guardian to oversee that process.

SMSF trustees unable to use a binding nomination or reversionary pension to direct a death benefit can appoint a guardian to do so, but need to ensure they act in a timely manner in the event of the death of a member.

Cooper Grace Ward partner Hayley Mitchell said SMSF trustees were not restricted to using a binding death benefit nomination (BDBN) or a reversionary pension to avoid another trustee having discretion over the handling of their death benefits and some trust deeds allowed for the appointment of a death benefit guardian.

“If a trustee is not locking in where their super death benefit has to be paid, that is, there is no binding nomination or reversionary pension, they can appoint a guardian via a trust deed, which in turn allows the member to appoint the guardian in writing under the terms of their will or by another document,” Mitchell said during a recent webinar.

“The death benefit guardian’s power is to either direct where the superannuation death benefit is paid after the member’s death or prevent a death benefit decision being made until they’ve consented to it.

“They act as a gatekeeper of who will receive a benefit and how the trustee will exercise their discretion to pay the death benefit out.”

She said trustees contemplating this option need to consider who will step into that role and their interaction with surviving trustees, and the timing for action after the death of the member appointing the guardian.

“If you are thinking about the guardian option, you still really need to also be looking at who is going to be sitting in that trustee position at the time of death and how to deal with those control mechanisms, otherwise there is the risk the death benefit guardian isn’t able to step in before the trustee makes their decision and it’s too late.”

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