Your superannuation binding death benefit nomination. A critical aspect of estate planning.

Posted on Jun 27, 2018 by Liam Tobin   |   Categories: Wills & Estates

A binding death benefit nomination is a notice given by a superannuation fund member to the Trustee of their superannuation fund requiring death benefits to be paid to the member’s nominated dependant(s) and/or legal personal representative.

Without a binding death benefit nomination in place, the superannuation fund trustee will, for better or worse, determine which one or more of the member’s dependants and/or legal personal representatives receive the death benefit.

A binding death benefit nomination will remain in force for a period of 3 years after the date it was first signed, or last confirmed or amended by the member, or if the governing rules of the superannuation fund fix a shorter period, at the end of that period. The rules of some self-managed superannuation funds (SMSF) enable the 3 year period to be dispensed with.

The advantages of a binding death benefit nomination are certainty in that the death benefits will be paid in accordance with the deceased member’s wishes and are less likely of a successful challenge by a disgruntled beneficiary.

The disadvantage of a binding death benefit nomination is that the member must remember to review the binding death benefit nomination regularly and that the trustee will be bound to comply with a valid binding death benefit nomination.

CASE STUDY: In a case involving a SMSF which held substantial assets, there was no binding death benefit nomination in place and as a result, the funds went to the “wrong” person and contrary to the wishes of the deceased.

This couple had 2 children, a daughter and a son. One of the trustees (the mother) passed away, and the father appointed his daughter to replace his deceased wife as the other trustee of the SMSF. When the father passed away, the daughter subsequently appointed her husband as the other trustee of the SMSF in place of her deceased father.

The father’s Will stated his superannuation benefits were to be divided equally between the son and the daughter. However, as trustee of the SMSF, the daughter paid all of her father’s superannuation benefits to herself.

The son commenced legal proceedings but was unsuccessful, as the court found that the trustee was required to administer the SMSF in accordance with the Superannuation Industry (Supervision) Act but had no duty to do so in an equitable manner.

In the absence of a non-lapsing binding death benefit nomination, the outcome in the above case was different to the wishes of the late father.

A binding death benefit nomination is a binding notice given by you, as a superannuation fund member, to the trustee of your superannuation fund to detail who will receive your superannuation entitlements upon your death. Without a valid binding death benefit nomination in place, your superannuation fund trustee will rely upon relevant legislation and your superannuation trust deed which governs the rules of your superannuation fund and will exercise discretion in respect to payment of your death benefits.

In many circumstances this means that your superannuation entitlements will not form part of your estate and therefore may not be dealt with in accordance with the terms of your Will.


The Value of a Binding Death Benefit Nomination

If you nominate your “legal personal representative” in your binding death benefit nomination, your superannuation entitlements will be paid to your estate and will therefore be distributed in accordance with your Will, if you have one, or otherwise in accordance with the laws of intestacy.

Most superannuation funds permit binding death benefit nominations, and a properly completed and current binding death benefit nomination will be binding on your superannuation fund trustee and would therefore eliminate any discretion and potential uncertainties and/or disputes concerning the distribution of your superannuation entitlements upon your death.

There are restrictions on who you can distribute your superannuation entitlements to upon your death, and generally your death benefits can be distributed to one or more of your “dependants” or your “legal personal representative”.

Your “dependants” include:

• Spouses (including de facto spouses);
• Children (including step-children, adopted children, foster children).
• Any person who was in an interdependency relationship with you at the date of your death; and
• Any other person (irrespective of age) who is in any way financially dependent on you.

Depending on your circumstances, it may be appropriate to implement a binding death benefit nomination or update/renew your current binding death benefit nomination, which may be lapsed, to gain certainty on how your superannuation entitlements will be distributed following your death.

If you would like to implement a Binding Death Benefit Nomination, contact one of Baker Love Lawyers’ experienced estate planning team. Phone (02) 4944 3322 or email Liam Tobin: