This checklist is only a guide and does not constitute legal advice. You should consult a professional to ensure you have a valid binding death benefit nomination reflecting your wishes.
Table of Contents
These are some consequences of not having a valid binding death benefit nomination (BDBN) for your SMSF:
your intended beneficiaries may not receive your superannuation benefits
an invalid BDBN can lead to family disputes and legal challenges among potential beneficiaries. This can cause delays, additional costs, and emotional strain on your loved ones, as they may need to contest the distribution of your superannuation benefits
an invalid BDBN may result in adverse tax consequences for your beneficiaries. They might face higher tax rates if the distribution does not follow the intended tax-effective strategies
an invalid BDBN can complicate your estate planning efforts. It may disrupt the overall distribution of your assets, including superannuation benefits and create inconsistencies with your broader estate planning goals.
1. Review the Trust Deed
Carefully read the trust deed of your self-managed superannuation fund (SMSF) to understand the specific requirements and provisions regarding death benefit nominations. Ensure that the trust deed allows for binding death benefit nominations.
2. Eligibility
Confirm that you are eligible to make a binding death benefit nomination. Typically, only members of the SMSF who have met specific conditions can make such nominations. Check the trust deed for any eligibility criteria.
3. Understand the Types of Nominations
Determine the type of nomination you want to make. There are generally two types:
a. Lapsing Nomination expires after a set period (usually 3 years) unless renewed or replaced.
b. Non-Lapsing Nomination remains valid until you revoke or replace it.
Check which type of nomination the trust deed allows you to make.
4. Beneficiary Designation
Identify the beneficiaries you wish to receive your superannuation death benefits. Specify their full names, addresses and the percentage or specific amounts you want each beneficiary to receive.
5. Ensure Beneficiary Eligibility
Verify that the beneficiaries you nominate meet the eligibility requirements for superannuation death benefits according to the SMSF rules, trust deed and superannuation legislation.
6. Consider Dependants and Legal Personal Representatives
Understand the distinction between dependants and legal personal representatives (LPRs). Dependants generally include spouses, children and financial dependents. LPRs are responsible for administering your estate if you lack capacity or after your death.
7. Follow SMSF Trust Deed Requirements
Ensure you follow any specific requirements outlined in your SMSF trust deed regarding the execution, validity and acceptance of a binding death benefit nomination. The trust deed may provide additional instructions or conditions that must be met for the nomination to be valid.
8. Use the Correct Form
Obtain the official form provided by your SMSF trustee or prepare a legally compliant form that meets the requirements of your SMSF trust deed and relevant legislation. The form should clearly state that it is a binding death benefit nomination and include all necessary details, such as your personal information, beneficiary designations and witness signatures.
9. Witness Requirements
Understand the witnessing requirements for your binding death benefit nomination. In Australia, the nomination typically requires two adult witnesses who are not beneficiaries or related to beneficiaries. Confirm any additional witnessing requirements in your trust deed or the relevant laws.
10. Sign and Date Properly
Sign the binding death benefit nomination form in the presence of the required witnesses. Ensure the witnesses sign and date the form, indicating their full names and addresses. Follow any specific witnessing requirements in your SMSF trust deed or applicable laws.
11. Lodge the Nomination
Submit the completed and signed binding death benefit nomination to your SMSF trustee. Follow any notification procedures specified by the trustee.
12. Acknowledgment from Trustee
Obtain written acknowledgment from all SMSF trustees confirming the receipt and acceptance of your binding death benefit nomination. Keep this acknowledgment with your records as proof that your nomination has been duly received and recognised.
13. Communicate with Beneficiaries
While not a legal requirement, informing your nominated beneficiaries about the existence and content of your binding death benefit nomination is generally advisable. This helps them understand their potential entitlements and minimises confusion or disputes.
14. Keep Records
Maintain proper records of your binding death benefit nomination, including copies of the signed document, trust deed and any related correspondence. Inform your executor or trusted person about the location of these records.
15. Review and Update Regularly
Regularly review your binding death benefit nomination to ensure it reflects your current circumstances and intentions. Consider updating it upon significant life events like marriage, divorce, the birth of children, the death of a nominated beneficiary or a change in your financial circumstances.
16. Seek Legal Advice
If you have any concerns or questions about the validity or compliance of your binding death benefit nomination, consult a qualified legal professional specialising in estate planning and superannuation matters. They can provide personalised guidance based on your specific circumstances and help ensure compliance with all relevant laws and regulations.
This checklist can serve as a guide, so consulting with professionals experienced in estate planning and SMSF matters is essential to ensure your binding death benefit nomination is tailored to your specific circumstances and complies with your jurisdiction's relevant laws and regulations.