Superannuation is for your retirement. However, a dead person no longer needs retirement money. Therefore, the Superannuation must leave the low taxation environment. It is paid out at death. But who gets your super at death? An SMSF Binding Death Benefit Nomination directs where your super goes at death. It either goes to a person (dependent) or into your Will.
However, your Superannuation is not an estate asset. It does not automatically go into your Will. What happens if you have no binding nomination? The SMSF trustee pays out your Super as it sees fit. Fight back. A binding death benefit nomination overrides the trustee’s discretion.
If your super goes to an adult child then the tax rate can be 17% or 32% tax. A superannuation testamentary trust in your Will often reduces that non-dependency death tax to zero.
Binding death benefit nominations provide certainty. They ensure that upon your death, your super is paid according to your wishes, and are not left to the trustee’s discretion.
If there is no binding death benefit nomination, then the only condition is that the trustee’s decision to pay the benefits is fair and reasonable. See Stock (as Executor of the Will of Mandie, Deceased) v N.M. Superannuation [ 2015] FCA 612.
Without a binding nomination, the Superannuation trustee has the unfettered discretion. This is to pay the benefits as it deems appropriate. The trustee:
Who is the trustee of your Self-Managed Super Fund? Is your trustee your second wife? Is it only the children of your first marriage. It is just one of your children?
The Trustee can and often does, greedily transfer the superannuation just to themselves. This is unless you make a non-lapsing binding nomination.
Many SMSF Deeds state that a binding nomination can only be completed on the exact Nomination Form contained in the Deed. However, most Nomination Forms don’t comply with the new laws. Therefore, it is impossible for that SMSF to have binding nominations.
The bundle of documents you are about to build corrects faulty deeds and nomination forms. The documents also update the SMSF Deed itsOur elf. You also get a fully compliant Nomination Form as part of the bundle.
Legal Consolidated also updates your SMSF Deed. This ensures that your SMSF can set up binding nominations.
Build the SMSF Binding Death Benefit Nomination. The pack includes:
1. Deed of Variation – this updates your SMSF Deed to allow for binding death benefit nominations
2. Death Benefit Agreement (binding on Trustee and does not expire)
3. Updated Product Disclosure Statement
5. Our covering letter of advice.
You can only nominate a:
1. superannuation dependent; or
2. legal personal representative (which is the trustee in your Will)
A ‘dependent’ includes:
1. your spouse and de facto (includes same-sex)
2. your children of any age (includes adopted)
3. any person financially dependent on you
4. any person in an interdependency relationship with you
5. your ‘legal personal representative‘ – the executor in your Will (LPR).
Your adult children pay 17% or 32% tax on your Superannuation. The death tax is on the concessional amount. Put a ‘Superannuation Testamentary Trust’ in your Will. The Super Testamentary Trust seeks to reduce death tax down to zero. You then nominate, in your binding nomination, your ‘legal personal representative’. You do this by ticking the ‘legal personal representative box’. Your Super then goes into your Will. The Super Testamentary Trust seeks to reduce the super death tax to zero.
If you have a Superannuation Testamentary Trust in your Will then you should leave the superannuation so it goes into your Will. But in the binding nomination, you don’t use the expression ‘my estate’ or ‘my Will’. Instead, you only use the expression ‘legal personal representative’. Our binding nominations comply with Munro v Munro  QSC 61.
See what happens if you use a website that is not a law firm to build your binding nominations: https://www.legalconsolidated.com.au/many-binding-death-benefit-nominations-built-on-non-law-firms-websites-dont-work/
Three things control where your Superannuation goes at death:
1. Trust Deed
2. Trustee’s discretion
3. Binding Nominations
1. not do anything, in which case, the Trustee decides where you super goes at death
2. non-binding nomination to help the trustee decide, but the Trustee of your SMSF may just ignore it
3. binding death benefit nomination that expires every 3 years – provided you die within the 3 years your Trustee must follow your binding nomination – it is binding on the Trustee
4 non-lapsing binding death benefit nomination – it never expires and it binds the Trustee
The Deed of Variation you are building allows you to opt for any of these.
Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
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