*FOR PROFESSIONAL ADVISERS*
A BDBN is an important estate planning tool. If valid, the Trustee must pay the death benefit to the legal personal representative and/or nominated dependant(s).
Ordinarily, a BDBN is valid if:
- The member has utilised the prescribed BDBN form from the relevant super fund and has named the legal personal representative and/or dependant(s) as a beneficiary.
- The requirements in the Superannuation Industry Supervision Act 1993 (Cth) have been met.
- The superannuation fund acknowledges acceptance of the BDBN.
However, we have recently observed additional requirements being imposed via the trust deed. A common example is what we like to call the ‘life events’ clause. Under the ‘life events’ clause, a BDBN may cease to have effect in a variety of circumstances. For example:
- The member marrying or entering into a de-facto relationship;
- The member divorcing or their de-facto relationship ending; and/or
- In any other circumstance, which the Trustee considers relevant (e.g. the birth of a child).
The latter option provides the Trustee with a wide discretion to render a BDBN invalid.
What does this mean?
It is important to be aware that a BDBN may not be as binding as you think.
If the BDBN was signed before the member married or divorced, or before they had children, the BDBN may no longer be binding.
It is also important to be sure the BDBN has been validly made and lodged. In practice, we have seen the following issues arise upon the death of a member:
- Although the BDBN is reviewed by the Trustee on receipt, it is not scrutinised until the death of the member. Consequently, although the member statement may acknowledge a BDBN, this is not evidence of its validity. We have recently observed basic errors being missed by the Trustee.
- Where there are multiple accounts or interests (e.g. superannuation and pension interests), the BDBN only capturing some of the accounts and/or interests.
- The BDBN being inappropriately witnessed. E.g. a witness is also a named beneficiary.
- The BDBN attributing part or all of the death benefit to a non-dependant.
- The BDBN not being dated.
What to do?
- Check the trust deed for the relevant super fund. Most are available online. In the trust deed, check to see when a BDBN ceases to have effect for the relevant super fund.
- Note however, that some funds can make retrospective changes to the terms of their trust deed, so although there is no issue today, that might not be the case tomorrow.
- Update the BDBN when the member’s personal circumstances change.
- Incorporate a review of the BDBN in your annual review process with the client and consider updating the BDBN regardless of whether there is a change in circumstances. The more recent the BDBN, the greater the weight attributed to it by the Trustee in the event of invalidity.
- Don’t simply rely on the member statement to confirm the validity of the BDBN. Ask for a copy of the BDBN and scrutinise it for yourself.
- In some instances, where certainty is paramount, you may need to consider alternative arrangements (e.g. a self-managed superannuation fund).
Contact us
If you have any general queries regarding a BDBN, please do not hesitate to contact us.