Two recent court cases dealing with Self-Managed Superannuations Funds (SMSFs) have highlighted the impotance of making, and recognising, Binding Death Benefit Nominations (BDBNs).
A member of a Superannuation Fund may generally make a ‘BDBN’ which, if valid, requires the Trustee of the Fund to pay out their death benefits (i.e., after they die) exactly as set out in the BDBN.
In the first case, a member of an SMSF expressed a desire in her Will that her Superannuation benefits be left to her Children (and specifically not to her Husband).
However, she did not make a BDBN, and the Supreme Court of Western Australia held that the preference in her Will did not affect the rights or duties of the Trustee of the fund under the fund’s Trust Deed. Consequently, the remaining Trustee (i.e., the Husband) had no obligation to appoint the deceased’s executor as a Trustee of the fund, and was also entitled to distribute the death benefits at his discretion, contrary to the direction in the deceased’s Will.
In the second case, the deceased member of an SMSF had executed a BDBN in favour of his children, but the Trustees (basically the deceased’s spouse and her son from a previous relationship) had wrongly believed that the BDBN was invalid and so had ignored it.
Nonetheless, the Supreme Court of Victoria held that the BDBN was valid and binding on the Trustees of the SMSF, and ordered that both the current Trustee of the fund and the deceased’s spouse personally were liable to make payment of the full amount of the deceased’s benefits as at the date of death, plus an interest component and costs, to the nominated beneficiaries under the BDBN.
