You should consider a binding death benefit nomination if you have a self-managed superannuation fund, to ensure your assets are distributed as you wish after your death. The RMB Estate Planning division explains:
Outside of the family home, superannuation is often our largest asset upon our deaths.
However, superannuation generally will not be dealt with under your Will unless the trustee of your superannuation fund determines that way.
Upon your death, the trustee will determine who will receive any death benefit payable from your fund in accordance with the fund's trust deed. The way of addressing this is preparing a binding death benefit nomination compelling the trustee to make payment to certain dependents or your estate.
In a self-managed fund, the trustees will generally be the members of the fund themselves, or a corporate trustee which the members have control over.
As they figure the control of the fund will pass to their executor or other family members, they do not consider the risk of not directing the payment of any death benefit upon their death.
The importance of having a binding death benefit nomination for self-managed superannuation funds was illustrated by the case of Katz v Grossman [2005] NSWSC 934. In this matter, a husband and wife were trustees of their self-managed superannuation fund. They had a son and a daughter.
Upon the death of the wife, the husband appointed his daughter as trustee in accordance with the trust deed and paid the wife's death benefit to himself as the surviving spouse. Upon the husband's subsequent death however, the remaining trustee (the daughter) appointed her husband as the second trustee. There was no binding death benefit nomination in place.
Unfortunately for the deceased's son, the new trustees of the fund made a determination to pay 100% of the death benefit to the daughter (excluding the son entirely). This was a valid exercise of the trustee's discretion under the trust deed which said payment of the death benefit could be made to a child of the deceased.
While there were options available to the son to challenge the decision, the unnecessary costs and burden associated with this could have been avoided if the deceased had prepared a binding death benefit nomination indicating that upon his death, the fund was to be distributed equally between his two children.
Regardless of who the trustees of the fund were following his death, they would have been required to follow this nomination.
Have you got a self-managed superannuation fund and discussed a binding death benefit nomination?
You can contact us. We'll be able to help you via a quick phone call, or ask us a question via email.