How to protect your Binding death benefit nominations for SMSFs

SMSF By Rod Commins, Patterson Houen Commins, Lawyers, Sydney.

You have a self-managed superannuation fund and you get a Binding death benefit nomination (BDBN) prepared by your very skillful accountant, you have your financial planner ride shotgun on the process and you yourself are an experienced and canny lawyer. What could possibly go wrong? It’s simple – right? WRONG!  Unless care is taken, grief may await, especially where second and subsequent marriages are involved.

In Munro v Munro, a recent decision of the Queensland Supreme Court involving a scenario similar to the above, the Judge held that a BDBN nominating “Trustee of Deceased Estate” rather than the member’s “legal personal representative” did not comply with the terms of the trust deed and Regulation 6.22 of the Superannuation Industry (Supervision) Regulations 1994 which places limitations on cashing of benefits in regulated superannuation funds to other than members, their dependents or legal personal representatives. Even though the generally accepted view is that Sections 59(1) and 59(1A) of the Superannuation Industry (Supervision) Act 1993 in respect of BDBN requirements do not apply to SMSFs, the SIS requirements may still be incorporated by the terms of the SMSF trust deed.

The finding in Munro’s case that the BDBN was invalid had the consequence that the payment of the superannuation benefit fell to the discretion of the fund’s trustees, who were the deceased’s second wife and step-daughter, rather than being distributed in accordance with the terms of his Will which made provision for the daughters of his first marriage.

The takeout for those with SMSFs is:

  • Carefully check the drafting of each BDBN to ensure that it strictly complies with all applicable requirements.
  • If the trust deed does not contain a provision that allows BDBN arrangements which may not satisfy the SIS Act and Regulations, such as non-lapsing (SIS Reg. 6.17A provides, among other things, that a BDBN ceases to have effect at the end of three years after it was first signed or last confirmed unless sooner revoked) and exclusion of the requirement to give the BDBN to the trustee prior to the member’s death, an amendment to the trust deed should be considered.
  • If the trust deed and/or the BDBN forms under it do incorporate an obligation to comply with the SIS Act and Regulations, then those requirements must be scrupulously followed.

Search for your local professionals

To find your local member, please use one of the options below:

Select a member from the following list



Contact Us

To contact one of our member firms in Australia and New Zealand, please complete the form below. All emails sent via this website are monitored on a daily basis.

    Send us a Message

    Please select a member firm from the map below to contact them directly:

    Members Map
    To view our global listings, please click here.