Tony Negline

Tony Negline says we often do not like to talk about estate planning, but it’s a critical issue and inextricably bound together with superannuation.

For many people, estate planning is an uncomfortable topic and they often see it as being about themselves. In reality, it’s actually about ensuring the people we are responsible for don’t face unnecessary hardship when we are no longer here. To put this another way, estate planning is about ensuring that the chance of disputes arising between our survivors is minimised and that adequate financial provision is made for our loved ones after our death.

Superannuation has always been an important estate-planning vehicle. For a commentator on superannuation issues, it’s become dangerous to write about death benefits inside super because a common perception is that there are no new insights to be shared about this topic.

Given the complexities of some lives, we will always be learning something new about super death benefits. This is especially so, given the fact that death benefits inside super involve money, families, trust law, tax law and super law – what a volatile emotional mix!


The original purpose of binding death benefit nominations – often referred to as BDBNs – was to make them as easy to use as cheap Will kits that can be bought from a local newsagent or over the Internet. One obvious objective of the requirements behind BDBNs was to avoid many of the well-known problems that occur with cheap Will kits.

Most BDBNs work well, but some potential legal issues surrounding trusts (remember that super funds are trusts) and super and tax law have been catching up with BDBNs. In other words, the super laws are never straightforward, and within some superannuation legal circles there is an expectation that BDBNs can be successfully challenged.

‘Given the complexities of some lives, we will always be learning something new about super death benefits’

In my view it is vital that super fund trustees and their members understand, where possible, that weaknesses in BDBNs exist and that they take action to ensure expensive and time-consuming litigation is avoided.

Within self-managed super funds (SMSFs) there are potentially two different types of BDBNs. One expires after three years and the other can potentially last until it’s rescinded by the super fund member (these are often called non-lapsing BDBNs).

In 2008, the Tax Office issued an SMSF Determination which said the three-year BDBNs are not available to SMSFs.

These three-year BDBNs are a bit like a Will, because they have to be witnessed by two adults who will not financially benefit from the binding nomination.

In a 2009 Queensland Supreme Court case, it was deter- mined that the three-year BDBN applied to a SMSF because of the wording of the fund’s trust deed, and in particular its catch-all clause.

The typical purpose of these catch-all clauses is to allow a trustee to do anything permitted or required by the super and tax laws.

Subsequent to this court decision, some lawyers say that three-year BDBNs can be used in an SMSF; others take a dif- ferent view and say they are unavailable in an SMSF unless the trust deed of the SMSF specifically allows them. In relation to non-lapsing BDBNs, some super lawyers suggest that a super fund’s trust deed should include express provision for the nomination to become invalid upon the occurrence of certain events after the BDBN is executed – such as marriage, divorce and a nominated beneficiary pre-deceasing the member.

An SMSF trust deed could be drafted or amended so that a BDBN could provide for future contingencies, just as many people do with their Will. Large APRA-regulated super funds would most likely find it too difficult to provide this level of flexibility.

In some cases it might be necessary to specifically detail in a super fund trust deed whom is to receive a death benefit. These are sometimes referred to as “embedded BDBNs”, because the beneficiary is specifically mentioned in the fund’s governing rules.

When a super fund member wants their death benefit paid to their legal personal representative (LPR), some super lawyers argue that the benefit should not be paid until the LPR has been formally appointed by the court (either via the granting of probate or the issuance of letters of administration).

One area of super fund death benefits that is often overlooked is the area of “notional estates”.

If a BDBN pays a benefit directly to a member’s dependants, then the super assets do not form part of the deceased’s estate.

In all states and territories other than New South Wales, a family provision claim could not be made against such super death benefits.

The family provision laws operating in NSW potentially open up a challenge to a BDBN and are meant to be applied across all states and territories; however, the other jurisdictions don’t appear keen to enact them.

It has sometimes been thought that the NSW notional estate rules cannot be used against BDBNs; however, there are a few cases, in their early stages, which will test this view.


When a self-managed super fund member dies, most trust deeds automatically deem that the member is no longer a trustee. The purpose of this provision is to ensure that the removal of the deceased trustee will not complicate the management of the super fund.

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