No requirement to approve BDBN

BDBN approval

The Hill v Zuda case has confirmed SMSF members are not required to get trustee approval to make or change their BDBN.

SMSFs are not required to include provisions for a trustee to acknowledge or give approval to a binding death benefit nomination (BDBN) and any that do have carried that requirement over from regulations that do not apply as proven by the Hill v Zuda case.

Cooper Grace Ward senior partner Clinton Jackson said SMSF trust deeds that have a requirement to acknowledge, receive, be given or approve a BDBN have typically imported that wording from Superannuation Industry (Supervision) (SIS) Regulation 6.17A, which does not apply to SMSFs.

“If you read the High Court decision on Hill v Zuda, there is not much there that is overly interesting except the last couple of lines, which says complying with these types of requirements that sit in SIS Regulation 6.17A in an SMSF is completely redundant,” Jackson said during a webinar today.

“I question why are we talking about this because it’s the member giving themselves a notice or approving their own nomination and it doesn’t make any sense.

“The requirement makes sense when a big fund is involved because we need to ensure they go about protecting their members and giving them the information they need, but in an SMSF it is just completely superfluous.”

He said that where an SMSF has opted to include such a provision, trustees and members can be caught out by the process of notifying other trustees and members or in a family law or estate dispute where receipt of the BDBN can be denied.

“Having a trustee acknowledge, receive or approve a BDBN is a big issue and while things are given and received acknowledgement and approval requires an action by the trustee, so we also need to have a resolution or having a BDBN signed saying we confirm we have received, acknowledged, approved this document,” he said.

“The worst thing about these deeds, however, is the need for approval to change the nomination and we see problems with this in family law disputes.

“Couples who no longer talk to each other and don’t want to be in the same room have to agree to change their nominations to their new spouse or to their kids.

“Most people never keep that paperwork and if you did get it approved you will need evidence and often the other people who are arguing for or against the change was the person involved in that approval process and they may, conveniently, not be able to find it.”

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