BDBNs, Estate Planning

Ensure estate plans match BDBN intent

estate planning BDBN

The certainty around the operation of a BDBN means SMSF practitioners should ensure related estate planning matches the intent of the nomination.

The certainty provided to the SMSF sector by the Hill v Zuda case around the operation of binding death benefit nominations (BDBN) means practitioners should be checking estate planning measures are consistent with arrangements inside those nominations.

Smarter SMSF chief executive Aaron Dunn said the Hill v Zuda case heard in the High Court last year did not change any preceding state-based court rulings and confirmed the governing rules of an SMSF trust deed governed the operation of a BDBN rather than the Superannuation Industry (Supervision)(SIS) Act and SIS Regulations.

Dunn said given this certainty SMSF advisers and accountants should now be looking at how a BDBN interacts with a range of benefits that apply on the death of a member.

“Making sure you have got the estate planning piece in order for your clients will be critically important as we see the dust settle in the BDBN space and allowing for us with absolute certainty and clarity to follow what the deed says,” he said during a recent webinar.

“Understand the impact in the context of your client deathbed nominations and think, as you are working through this process, how much flexibility and certainty is required with different clients subject to the SMSF client situation.

“Blended families is a really good example where greater certainty may be required versus a husband and wife who are happily married and money is basically passing through to the estate thereafter.”

He added advisers and accountants should also be examining the reversionary status of income streams in light of the BDBN arrangements and whether the reversionary status is appropriate.

“They won’t always will be so check the documents in respect of the payment of income streams actually match the estate planning work that is there and the outcomes they are intending to have actually will transpire,” he said.

“We see examples where reversions may be in play and they are forcing money to go a particular way when that is clearly not what the instructions of the individual wants to achieve through their will and other testamentary documents.

“Finally, make sure you are regularly reviewing it because you cannot set and forget this stuff.

“You need to be on your clients on an ongoing basis because these things are critically important and are most likely to end up in court given the volume of wealth that sits inside superannuation and SMSFs.”

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