A proposal to simplify the application of binding death benefit nominations (BDBN) across all forms of superannuation has received broad support among SMSF practitioners, according to a senior legal specialist.
DBA Lawyers special counsel Bryce Figot said the Law Council of Australia (LCA) approached Treasury in January with recommendations to change the current regime for BDBNs, primarily to remove some of the ambiguities about how they operate.
“[The LCA proposed] a binding death benefit nomination can nominate anyone because right now, for example, I can’t arrange my super upon my death to be paid to a charity or, typically, you can’t [pay it to] a friend or a grandchild,” Figot told attendees at an online briefing hosted by DBA Lawyers last Friday.
“[Additionally], superannuation death benefits would automatically form part of a deceased person’s estate unless the deceased made a binding death benefit nomination.”
He added the LCA also proposed a BDBN could not be made or modified by an enduring power of attorney (EPOA), unless the EPOA document appointing someone as an attorney expressly authorised this, and all BDBNs would be non-lapsing and last indefinitely.
As a measure of support for the proposed recommendations, 93 per cent of SMSF professionals attending the webinar agreed via a poll that the implementation of the reforms would be a positive development.
“It’s quite different to the landscape which we’re used to. I like [the recommendations], I think they’d be good changes, not so much for lawyers, but good for the industry,” Figot said.
“Those [reforms] may well become the law. The Law Council of Australia is not a wacky fringe body. If they recommend something, it may just happen.”
While the proposed reforms were welcome, he advised practitioners and trustees of the current standard expected with regard to documentation when drafting a BDBN.
“Ensure the full SMSF document trail is perfect. [This] means you have the full physical original establishing deed, you have all full physical original deeds of variation [and] you have all full physical change-of-trustee documentation,” he said.
“The current governing rules should allow for indefinite binding death benefit nominations. All the above needs to be correctly drafted.
“This is not a case of close enough is good enough and all of the above has to be correctly executed. I believe that’s best practice [when] the binding death benefit nomination is correctly made.”