A technical specialist has warned advisers and their SMSF trustee clients the recent decision the High Court handed down in the Hill v Zuda case has increased the importance of conducting a review of death benefit nominations more frequently rather than less often.
“What Hill v Zuda provided us with was certainty that our self-managed super fund trust deeds override the SIS (Superannuation Industry (Supervision)) regulation requirements about binding death benefit nominations. So it gives us that capacity to have non-lapsing binding death benefit nominations,” SuperGuardian education manager Tim Miller noted during his most recent technical webinar.
However, Miller pointed out the non-lapsing nature of a binding death benefit nomination can actually be a disadvantage should the member change their mind as to whom their death benefits should be paid out. As such, the decision may mean SMSF members should review their death benefit nominations more frequently event though the High Court decision may suggest otherwise.
“Future-proofing [death benefit nominations] to me suggests that while it’s great to have certainty around death benefit nominations, we still need to be reviewing our deed and regularly reviewing our nominations,” Miller said.
“[That is to] make sure we can have non-lapsing [binding death benefit nominations] because the deed is silent [regarding] the SIS Regulations, but is prescriptive as to how nominations should be set out, but then that our nominations mirror what our deeds provide for.
“So even if they are non-lapsing, [we must ensure they are being reviewed] on a regular basis.”
Despite potentially prompting a more regular review of death benefit nominations, he acknowledged the Hill v Zuda decision was a good result for SMSFs.
“But I think the result of Hill v Zuda is a far more positive one than had the result gone the other way [because that would have meant we’d] have to review all of the non-lapsing nominations [in place],” he said.