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Your Superannuation may well become your principal asset. Retail Funds or Self-Managed Super Funds - SMSF - provide great advantages over ordinary savings in your retirement. There are however traps for those not taking advice or paying attention to the serious requirements of the ATO and ASIC placed upon both styles of funds.

The SMSF Trust Deeds control the powers that can be exercised by your private Fund. They require careful drafting and regular review.

A well drafted effective BDN is one of the most important tools in any effective estate plan. A badly drafted BDBN or allowing the BDBN to lapse can have disastrous unintended consequences.

1. Binding death benefit nominations (BDBN) – What is it?

2. BDBN - Who can take?

3. What level of detail can be in a BDBN?

4. Who should have a BDBN?

5. Can your EPOA attorney deal with a BDBN?

6. Does a reversionary pension override a BDBN?

7. Interfamily disputes.



1. Binding death benefit nominations (BDBN) – What is it?

A BDBN is a notice given by a super fund member to the trustee of their super fund requiring a death benefit to be paid to the member’s nominated dependant(s) and/or legal personal representative.

Without a valid BDBN in place, the super fund trustee will, for better or worse, determine which one or more of the member’s dependants and/or legal personal representative receive the death benefit.

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2. BDBN - Who can take?

There are legislative restraints upon those who can take advantage of various tax incentives of BDBNs.

A deceased member’s death benefits can generally only be paid to one or more of their dependants and/or their legal personal representative. Hence, the only people who can be nominated in a BDBN are one or more of their dependants and/or their legal personal representative.

A person’s dependants include their spouse, any child, any person with whom they have an interdependency relationship and any person who is financially dependent on them. Spouse includes same-sex de facto spouse and child includes adopted child, step child, ex-nuptial child and child of the person’s spouse. Two persons have an interdependency relationship if they have a close personal relationship and either:

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3. What level of detail can be in a BDBN?

Many pro-forma BDBNs offer members the opportunity to do no more than nominate one or more of their dependants and/or their legal personal representative and the proportion of the death benefit that will be paid to each of those persons, whereas in our opinion, they can do so much more. A more sophisticated BDBN can, for example:

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4. Who should have a BDBN?

Examples:

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5. Can your EPOA attorney deal with a BDBN?

A BDBN is not a testamentary instrument. It is, therefore, at least arguable that the holder of an enduring power of attorney can make, confirm, amend or revoke a BDBN for the person on whose behalf they hold the enduring power of attorney, particularly if there is an express power in the enduring power of attorney authorising them to do so.

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6. Does a reversionary pension override a BDBN?

In our opinion, it generally will not, though my answer may differ depending on the precise wording of the trust deed, the pension paperwork and the BDBN in question.

Clearly, inconsistency between pension paperwork and a BDBN should be avoided.

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7. Interfamily disputes.

Ineffectual BDBN’s in SMSFs will almost certainly result in Court proceedings. They can highly problematic in situations where there are children of more than one marriage or conflict between children of marriage one and spouse number two. The number of these style of disputes coming before the courts are rapidly increasing.

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