Binding Death Benefit Nominations
Binding death benefit nominations are an important part of estate planning.
Superannuation entitlements are one of a person’s most valuable resources. A person’s interest in a superannuation fund does not automatically pass in accordance with the provisions of their will. So it is essential that proper advice is received about what will happen to superannuation entitlements upon death, and that appropriate strategies are in place to ensure that superannuation entitlements achieve a person’s estate planning objectives.Generally, the Trustee of a superannuation fund (whether it be an industry fund, or a Self Managed Superannation Fund) has a discretion in respect of payment of death benefits. However, if a valid binding death benefit nomination is in place when a person dies, the Trustee of the superannuation fund must pay death benefits according to the directions it contains.
Not all super funds let you create a binding death benefit nomination
Importantly, in order for a member of a superannuation fund to make a binding death benefit nomination, the rules of that fund must expressly permit the creation of binding death benefit nomination. Some superannuation funds won't allow it. In particular, a Self Managed Superannuation Fund (SMFS) created prior to 1999 is unlikely to contain a rule permitting the creation of a binding death benefit nomination unless it has been appropriately updated since 1999.Proper advice must be received to determine whether a person’s industry fund or SMSF permits the creation of binding death benefit nominations. In the case of SMSF’s, advice should also be received about having the rules of the fund updated so as to permit the making of a binding death benefit nomination.
Consider the following hypothetical example:
Jack lives happily with his second wife, Jill, and their young child. Jack and Jill jointly own their family home, which will pass to Jill by survivorship upon Jack’s death. Jack’s only other significant asset is his death benefit under his SMSF.
Jack also has two teenage children from his first marriage.
Jack wants to leave his superannuation death benefit to the children of his first marriage, as the child of his marriage to Jill will be adequately provided for by assets that are owned by Jill.
Jack’s estate planning objectives will be difficult to achieve unless his SMSF permits the creation of binding death benefit nominations. By creating a binding death benefit nomination in favour of the children of his first marriage, Jack can ensure that adequate provision is made for these children in the event of his death.
A member of the Stacks Wealth Protection Team will be able to answer any questions you have, and help you to set up a binding death benefit nomination.
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