A Binding Death Benefit Nomination (BDBN) is an essential yet often overlooked, component of estate planning for many Australians.
This legal instrument lets you control who receives your superannuation benefits upon death. While a will can dictate the distribution of most of your assets, it does not extend to your superannuation.
Superannuation can be a significant asset for many people; for some, it represents the more substantial part of their estate. However, when you die, superannuation benefits don’t automatically flow to your estate. The superannuation fund’s Trustee instead distributes them based on the fund’s rules and the relevant superannuation law.
While this is the case, you can clarify your wishes to the Trustee by making a binding death benefit nomination. That’s where a BDBN comes into play. By correctly executing a BDBN, you can nominate dependents or a legal personal representative to receive these benefits, providing clarity and peace of mind for your loved ones.
Our estate planning lawyers are here to provide an in-depth understanding of the BDBN, its importance, and considerations for ensuring its validity.
What Is a Binding Death Benefit Nomination?
A Binding Death Benefit Nomination (BDBN) is a legal instrument used in Australian superannuation law that allows a superannuation fund member to nominate a beneficiary or beneficiaries to receive their superannuation benefits upon their death. It’s a way of controlling where your super benefits will go when you die.
BDBN Legal Requirements
- The Nomination: The BDBN must nominate one or more dependents or a legal personal representative (the executor or administrator of your estate).
- The Signature: The BDBN must be signed and dated by the member in the presence of two witnesses over 18 years old and not nominated to receive a benefit in the BDBN.
- The Expiry Date: Typically, a BDBN will expire three years after it was first signed, dated and witnessed. It’s important to renew or confirm the nomination every three years, or it will become non-binding.
- The Fund’s Rules: The BDBN must comply with the superannuation fund’s rules and the Superannuation Industry (Supervision) Act 1993.
When a valid BDBN exists, the fund’s trustees must pay the death benefit to the nominated beneficiaries, provided they are eligible under the law and the fund’s rules. Without a BDBN or if the BDBN is invalid, the trustees can decide which dependents or legal personal representatives will receive the death benefits.
Can a Binding Death Benefit Nomination Be Challenged?
Yes, an Australian Retirement Trust Binding Death Benefit Nomination (BDBN) can be challenged, although the process and grounds for doing so can be complex.
A BDBN offers the advantage of being legally binding directive to the trustees of your superannuation fund, instructing them to distribute your superannuation death benefits to the person(s) you nominate. However, just like a will, disputes can arise in circumstances such as:
- Validity of the BDBN: If the BDBN was not correctly executed according to the trust deed and Superannuation Industry (Supervision) Act 1993, it may be challenged on the grounds of invalidity. Validity issues can include the BDBN needing to be updated (more than three years old and not renewed), improperly witnessed, or the nominated beneficiaries not being dependents as defined by superannuation legislation.
- The Capacity of the Member: If it can be proved that the member was not of sound mind or under undue influence when they made the BDBN, it might be deemed invalid.
- Dependent Status: If a person named in the BDBN does not meet the legal definition of a dependent under superannuation law at the time of the member’s death, this could be grounds for a challenge.
- Inconsistencies with Estate Plans: A contradiction between a will and a BDBN can result in a legal challenge. Ensuring that your BDBN aligns with your overall estate plan is essential.
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Who Can Be Nominated in a Binding Death Benefit Nomination?
The person you nominate must be a ‘dependant’ under superannuation law or your legal personal representative. Here’s who qualifies:
- Spouse: This includes a legal or de facto spouse, including same-sex partners.
- Children: Your children of any age, including adopted children, step-children, or children within your care.
- Financial Dependents: Any person financially dependent on you at your death can be nominated. This could include an elderly parent you care for or an adult child with a disability.
- Interdependent Relationship: If someone lives with you in a close personal relationship and one or both of you provide the other with domestic support and personal care, they can be nominated. This may include a sibling, close friend, or relative with whom you share a home.
- Legal Personal Representative: You can nominate your estate, meaning your legal personal representative (the executor of your will or the administrator of your estate) will receive your super benefits. These benefits will then be distributed according to your will or the intestacy laws if you die without a valid will.
To be valid, the BDBN must be signed and dated by you in the presence of two witnesses aged 18 or over who are not nominated in the BDBN. It’s important to remember that the BDBN may need to be renewed every three years to remain effective, depending on the rules of your super fund.
Also read: Rescission vs Termination in Australian Estate Planning
Do Binding Death Benefit Nominations Expire?
A Binding Death Benefit Nomination (BDBN) expires every three years, meaning it must be renewed to remain valid. However, some superannuation funds offer what’s known as a ‘Non-Lapsing Binding Death Benefit Nomination’.
A Non-Lapsing Binding Death Benefit Nomination does not expire after three years. Instead, it remains in effect until it is either revoked by the member or updated with a new nomination. This type of nomination can provide greater certainty and less administrative work as it does not require regular renewals.
Even with a non-lapsing nomination, it’s still recommended to review it periodically, particularly when your circumstances change (e.g., marriage, divorce, birth of a child). Remember that the rules surrounding BDBNs, including non-lapsing nominations, can vary between superannuation funds. Therefore, it’s advisable to check the specifics with your fund or seek professional advice to ensure your nomination is valid and aligns with your estate planning objectives.
Need Guidance with Your Binding Death Benefit Nomination?
Planning for the future can be simple. Walker Pender Group is here to simplify your superannuation estate planning with our guide to Binding Death Benefit Nominations. Don’t leave your super’s fate to chance. Contact us today for expert guidance and peace of mind.