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Trust deed has final BDBN sway

trust deed BDBN

The trust deed is more important than any rules of law with regard to binding death benefit nominations that are not constrained by a set time frame.

A technical manager has reminded SMSF advisers and trustees alike that a fund’s trust deed dictates how a binding death benefit nomination (BDBN) operates regardless of legislative precedents established in courts of law.

The West Australian Court of Appeal in the Hill v Zuda case last year decided BDBNs held within an SMSF were not subject to the expiration time frame as defined in Superannuation Industry Supervision (SIS) Regulation 6.17A (7) under certain circumstances.

The regulation states a BDBN, unless sooner revoked by the member, will cease to have effect after three years after the day it was initially signed or last amended by the member, or less than this three-year period if the governing rules of the fund prescribe a shorter expiration time frame.

Further, it was stipulated this decision is binding in all Australian jurisdictions.

“This is the final case that now says across Australia in all jurisdictions the self-managed superannuation fund’s trust deed can allow for a BDBN that deviates from the three-year lapsing rule and the witnessing rule in the SIS Regulations and SIS legislation,” SuperConcepts SMSF technical support executive manager Nicholas Ali told attendees of a recent adviser webinar.

“But it’s really, really important that the fund’s trust deed expressly and clearly allows for that non-lapsing binding death benefit nomination.

“You’ve got to be really, really careful because a lot of trust deeds do say, and I’m going to paraphrase here, this fund will allow the member to have a binding death benefit nomination in accordance with the superannuation legislation and regulations.

“[But] that means that the fund has tied the binding death benefit nomination to section 59 of the SIS Act and regulation 6.17 of the SIS Regulations.

“So we’ve got to make sure that the fund’s trust deed says, and again I’m paraphrasing here, this fund will allow a member to have a binding death benefit nomination that doesn’t have to comply with the SIS Regulations or the SIS legislation.

“That’s what we want to allow a non-lapsing binding death benefit nomination.”

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