Many people are unaware that superannuation is not an asset you can bequeath to someone in your Will. However, you can plan how your Self Managed Super Fund (SMSF) is to be dealt with on your death. Minimal administrative issues and costs may arise on the death of a member with the right planning. If appropriate succession planning has not taken place, there may be uncertainty as to where the benefits of the SMSF are paid.
SMSF legislation does not give the right to a member to make a Binding Death Benefit Nomination (BDBN), but rather this is provided in the governing rules of the SMSF as provided in the SMSF Deed.
Ensuring that you abide by the rules of the SMSF, a clear BDBN must be provided to nominate to whom the death benefits shall be paid.
An alternative option to the BDBN is to hard-wire the SMSF such that the payment of your death benefits is clearly defined and set out in the SMSF Deed, rather than relying on a BDBN.
A hard-wired SMSF deed can provide a SMSF member with greater certainty as to who their death benefits are to be paid on their death.
It is also appropriate to determine who will be the future controller or trustee of the SMSF. The SMSF deed will contain provisions that will determine who will become the new trustee upon a member’s death (which is often your Executor). On the death of a member, the Superannuation Industry Super Vision Act 1993 Cth) allows a six-month window for an SMSF to rectify the trusteeship.
Whilst a SMSF is only part of a member’s overall succession planning, it is important to ensure appropriate consideration is given to SMSF death benefits when undertaking your overall succession planning.
It is important that your Will, Powers of Attorney, and any other documentation align so that your superannuation death benefits are paid as you wish.
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For more information on superannuation, Wills, and other testamentary documents contact our Wills & Estates team for advice and assistance. Email us if you would like us to contact you.