Just because a person has superannuation benefits does not mean that they must have a binding death benefit nomination. It is their choice about whether they will or will not have a nomination.
Our view is that members of a SMSF only need to leave a binding death benefit nomination if they cannot be certain that their death benefits will pass in the way that they want them to pass if they don’t leave one.
Just as a nomination may be desirable in getting certainty in the passing of death benefits, not having a nomination may not be fatal in a husband and wife fund for example, where:
- There are children and some are under 18 or otherwise dependent on the member (including financially) and some are not; and
- The family relationships are harmonious; and
- All members of the family can be trusted to work together in reaching the desired after tax outcome.
In an appropriately structured will and given a harmonious family unit, the absence of a nomination can actually leave the family with greater flexibility in managing the tax effective passing of wealth on death.
It must be kept in mind that once made and unless revoked, a nomination may not take into account the changing circumstances of the member.
Therefore, not only should they never be made in isolation from the estate plan and only then with care, they should be constantly reviewed.
What should you do when using a binding death benefit nomination?
If you want to leave a binding death benefit nomination, make sure that:
- Your SMSF trust deed permits them;
- You comply with the terms of the trust deed and the superannuation law in making it;
- It aligns with what you want to achieve in passing your wealth on your death, including under your will; and
- You constantly review it for its currency.
Disclaimer
The information in this article is general in nature and is not intended as legal advice. You should not do or fail to do anything in reliance on information in it. We do not accept any responsibility for any loss that you suffer if you do. You should seek professional advice before you do anything about the issues set out in this article.
