My Will lays it all out, doesn’t it?
No doubt you have been very specific in writing your Will, so that your legal representative upon your death—your executor—has very clear instructions on how the proceeds of your estate will be distributed.
So with that in place, what’s the problem? The issue upon death is that not all things automatically pass to your estate, to be administered as part of your Will. One major asset that does not, is superannuation.
The term Trustee is often used in relation to a superannuation fund, be that a retail fund, an industry fund, or a Self Managed Super Fund (SMSF). What is understandably overlooked is what that actually means. The reality is that you don’t directly own your Super, it is held in trust, and managed by the trustee. At the time of your death, in the absence of other instructions, the trustee directs where the proceeds of the fund are to go, within the guidelines of the trust deed and superannuation legislation.
Therefore, it is important that clear direction is given to the fund trustee so that the beneficiaries you wish to receive that inheritance, do so.
To nominate, or not to nominate, that, is the question!
If no benefit nomination is made, the trustee will decide whether to pay the superannuation benefit to your estate, or which other beneficiaries are to receive the benefit.
If the nomination is non-binding, the trustee of the super fund will take your instructions into account, but will have the ultimate discretion to make a final decision. This may include deliberations about such things as significantly changed circumstances, a new spouse, or a bankrupt beneficiary, for example.
A binding death benefit nomination (BDBN) is just that—it means the fund trustee is bound to comply with the nomination, provided the nomination is valid, current, and complies with the trust deed and superannuation law.
To be valid, the nomination must:
- Be in writing—dated, signed and appropriately witnessed
- Be received by the trustee
- Be current at the time of your death
- Nominate only allowable beneficiaries
Allowable beneficiaries are:
- Your spouse or partner
- Anyone financially dependent upon you, or in an interdependency relationship
- Your estate or legal representative (executor)
A BDBN is normally valid for three years, and will lapse after that time, however non-lapsing nominations are also possible, but only if allowed under the trust deed.
One good deed deserves another
Unfortunately, not all deeds are created equal. Superannuation fund trust deeds do vary, and some can even be out of date if they have not been updated to conform with new legislation. This is well worth checking, particularly with SMSF deeds.
It is important that your binding death benefit nomination is properly constructed and lodged, and that it complies with the trust deed, and kept valid.
Your Binding Death Benefit Nomination, and your Will
To be valid, compliant and current, it is vitally important to ensure that all elements in the chain are set up correctly. With one link broken, the chain is useless.
Superannuation & Estate Law … don’t assume… get it right It will be easier with sound legal advice from the experts. Owen Hodge Lawyers. We are here to help.