Estate Planning, SMSF

Proper BDBN commitment required

An estate planning strategy can achieve the desired outcome if the trustees involved respect all aspects of the chosen course of action.

A superannuation lawyer has emphasised the importance for SMSF advisers and their clients to be fully committed to all aspects of the estate planning strategy they have decided to implement such as putting a binding death benefit nomination (BDBN) in place.

“There is an argument that if you are actually so worried about having control over death benefits that you want to employ a BDBN then why would you do that on a one page document that you leave lying around anywhere,” View Legal director Matthew Burgess suggested to delegates at the recent SMSF Professionals Day 2023 co-hosted by selfmanagedsuper and Accurium.

He pointed out if this inadequate attention to detail is likely to occur an alternative estate planning approach may be more appropriate.

“If this is going to be the case then why would you not put the instruction into the SMSF trust deed itself and turn it into what lawyers variously refer to as an SMSF will?” he asked.

“If it is seriously that important maybe you need to give it that level of respect in terms of the documentation that is not just some loose piece of paper floating around.”

According to Burgess making use of an SMSF will has additional benefits that will allow trustees to avoid common compliance traps associated with BDBNs.

“An SMSF will can side step one of the really big practical issues we see with BDBNs. Quite often a trust deed will say yes you can do a BDBN and here are all the ways to tick that box but unless you do it in the format contained in the schedule to this deed it’s invalid,” he explained.

“Quite often this sentence will be buried away in the depths of the deed,” he noted.

“So be really, really careful about that if you are using such as deed.”

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