Accountants in Sydney: Understanding Binding Death Benefit Nominations for Superannuation Distribution
Accountants in Sydney can assist you in ensuring the distribution of your superannuation benefits according to your wishes. As one of your most significant investment assets, your superannuation benefits are determined not by your Will but by the trustee of your Superannuation Fund following the Fund’s rules. One way to direct the distribution of your superannuation benefits is through a Binding Death Benefit Nomination (“BDBN”). By establishing a BDBN, you can ensure that your superannuation benefits are distributed as per your preferences.
A BDBN is a notice you give to the trustee of your superannuation fund requiring a death benefit to be paid to nominated dependants and/or the executor of your Will. Your dependants include your spouse, children, stepchildren, any person you have an interdependent relationship with, or anyone financially dependant on you. You can only make a BDBN if your Fund’s governing rules allow it.
While a BDBN provides the advantage of certainty, it carries the risk that if it is not reviewed and updated regularly as personal and family circumstances change, it can result in inappropriate outcomes. For example, a BDBN favouring a former spouse or a bankrupt child might mean your loved ones don’t benefit from the assets you’ve grown for years. You can avoid this problem by reviewing your estate plan regularly.
Often BDBNs are confused with reversionary pensions. A reversionary pension is a pension that, on the death of the original member, continues to be paid to a nominated reversionary beneficiary. The pension doesn’t cease – it simply continues to be paid to the reversionary pensioner.
A reversionary pension is often a good option if your superannuation accounts have been converted to pensions. They allow you to provide death benefits to spouses and minor children. Reversionary pensions, however, can’t be used for lump sum payments, nor can they be used for payments to adult children or the executor of your estate. In such circumstances, a BDBN may be your best option.
As with all estate planning matters, it is critical that you seek qualified advice and regularly review your plans.
If you have any queries in relation to the above, don’t hesitate to reach out and contact us.
Kreston Stanley Williamson Team
*Correct as of March 2015
*Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
