A recent Queensland Supreme Court case highlights the importance of ensuring that your binding death benefit nomination (BDBN) complies with the requirements of the trust deed for your self managed superannuation fund (SMSF).
In Munro v Munro the Court held that Mr Munro’s BDBN was invalid (and therefore not binding on the trustees) because it nominated the “Trustee of Deceased Estate”. The SMSF trust deed only allowed a binding nomination in respect of a dependant or legal personal representative. The technical view taken by the Court was that the required terminology in the nomination was “legal personal representative”. The result meant that Mr Munro’s second wife, (Patricia) was able to pay the entire death benefit to herself. Had the death benefit being paid to Mr Munro’s estate, Patricia would have received a bequest of $350,000 with the rest being paid to Mr Munro’s daughters from his previous marriage.
With superannuation forming a large portion of many clients’ wealth, the validity of BDBNs are increasingly likely to be tested. In the context of your estate planning, it would be wise to consider:
- who will control your SMSF on your death?
- who has drafted your BDBN and have they read the trust deed for your SMSF?