Binding Death Benefit Nominations: The importance of compliance
A binding death benefit nomination (BDBN) indicates who the self-managed superannuation funds (SMSF) is to pay your death benefit when you die. The recent Queensland Supreme Court case of Munro v Munro highlighted the importance of ensuring that our BDBNs within SMSFs are correctly drafted. This case involved a dispute in relation to the payment of a SMSF death benefit between the SMSF trustees and the executors of the estate.
Mr Barrie Munro was a trustee and member of an SMSF with his second wife, Patricia. Mr Munro died in 2011. He was survived by Patricia, 2 daughters from his previous marriage, Vanessa and Elke, who were executors of his will. After Mr Munro’s death, Patricia decided to appoint her daughter Ms Pooley as a replacement trustee of the SMSF in order to maintain its compliant status.
The majority of Mr Munro’s wealth was held by his SMSF. His will provided that Patricia was to receive $350,000, with the residue of his estate to be divided equally between his 2 daughters. Prior to Munro’s death he completed a BDBN specifying that his superannuation benefit was to be paid to the “Trustee of the deceased estate”. The same wording had been used in his previous 2 BDBNs in 2004 and 2006.
A dispute arose between Vanessa and Elke and Patricia and her daughter in regards to the payment of the SMSF death benefit. In this case the SMSF trust deed required the trustee to pay any benefits in accordance with a binding nomination. The deed required the death benefit to be paid to either:
- One or more of the member’s dependants; or
- The member’s legal personal representative
If these requirements were not satisfied, then the Trustee could pay the benefit at their discretion. The wording of Mr Munro’s BDBN did not comply with superannuation law or the trust deed. Therefore, the Court held that the BDBN was invalid even though it appeared that Mr Munro intended his superannuation benefits to be paid to his estate.
The above case reinforces the importance of ensuring your BDBN is compliant with superannuation law and your SMSF trust deed. If you require any further information in relation to BDBNs, please contact our team of lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.