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Binding v. non-binding death benefit nominations

For most Australians, superannuation is their largest asset except for the family home, so it is important to consider how it should be dealt with upon death. In contrast to personally held assets that will generally form part of a person’s deceased estate and be subject to distribution under the terms of their will, the direction as to who can receive one’s superannuation upon their death must be made in a certain way (not typically via a will) and only to certain people. This article will examine ‘death benefit nominations’ and the manner in which these nominations should be made.

Death benefit nominations can be a vital component of estate planning, guiding the payment of superannuation and, in certain cases, pension benefits upon an individual’s death. There are two distinct approaches for making these nominations: binding and non-binding. Each method (both offered by DBA Lawyers) carries advantages and disadvantages, that fund members should consider given their particular circumstances.

Advantages of binding death benefit nominations (BDBNs)

Greater certainty

Under most SMSF deeds, a fund trustee (who is not always the executor of the deceased person’s will) typically needs to exercise a discretion regarding payment of death benefits. Therefore, a BDBN can provide greater certainty by removing this discretionary aspect, ie, because a trustee must generally adhere to directions specified in valid BDBN.

Many members want to know that their directions in their BDBN will be respected and this can provide significant peace of mind. However, while a BDBN is binding on the trustee of a fund, there have been past instances where a BDBN was ignored and resulted in costly legal proceedings. For an example of a BDBN not being followed, see our article on the case Wooster v Morris [2013] VSC 594.

Overcoming the claims staking process

By removing the trustee’s discretion, a BDBN will also overcome a number of issues associated with the requirement that trustees must follow a proper process when exercising a discretion to pay superannuation death benefits.

The trustee only needs to refer to the validity of a valid BDBN and the funds governing rules to justify its position in paying death benefits in accordance with that BDBN. In particular, the trustee will not need to demonstrate that it has only made payment after properly exercising a discretion in accordance with applicable trustee duties, ie, by fully considering all eligible beneficiaries based on their individual financial circumstances.

In broad terms, this means there is no need for the trustee to go through a careful process of contacting all potential beneficiaries and ascertaining their circumstances prior to making a decision regarding payment of death benefits.

When no BDBN exists and a proper claims staking process has not been undertaken, trustees can face costly and protracted disputes which can result in courts upsetting their decisions and even removing them as trustees, especially in cases where there is a blended family and the executors of the estate are not the same persons as the trustees of the fund.

For an example of where an SMSF trustee and the executor of the estate were different and a dispute arose, see our article on Wareham v Marsella [2020] VSCA 92.

Naturally, it is prudent to have a lawyer review the SMSF deed history, BDBN and related documents to confirm that a BDBN is legally effective and binding before simply relying on it.

Addressing conflicts

A spouse of a deceased member who acts as the executor (or administrator) of the deceased’s estate may find themselves in a conflicted position where the deceased did not have a BDBN in place and the spouse seeks to have the death benefits paid to them personally. This is due to the strict fiduciary duties that apply to executors/administrators who are duty bound to collect assets on behalf of the estate and must act in the best financial interests of the beneficiaries of the estate.

Thus, a surviving spouse who may be in a position to determine how death benefits are paid (ie, (as the remaining SMSF trustee/director) should have regard to any applicable fiduciary duties they have as an executor/administrator before taking any action where there is no BDBN.

If such a surviving spouse elects to receive death benefits personally and there is no conflict authorisation  in place (eg, in the deceased’s member’s will), it is likely this will be a conflicted transaction and  the payment would be at risk of legal challenge. Alternatively, the spouse may be forced to decline the role of executor to avoid a potential dispute, which may be contrary to the deceased’s intentions.

A BDBN can greatly reduce this risk by creating a clear direction to the trustee that removes the potential source of conflict.

Disadvantages of BDBNs

Strict formalities

The formalities involved with making a valid BDBN must be strictly followed to ensure that the nomination binds the trustee. These formalities usually include that the document be in writing, that it nominates an appropriate death benefit recipient (eg, a dependant or a legal personal representative) and that there are clear binding directions on who the trustee is to pay (rather than expressing a wish).

Naturally, for a BDBN to be binding, the entire deed history and document trail should be reviewed. This requires a review of all prior deeds, rules, and changes of trustees that must be validly varied in compliance with prior variation powers, relevant consents, and appropriate legal formalities including valid execution. All these formalities must have been complied with in the document trail otherwise the fund’s governing rules and BDBNs, etc, may be subject to challenge.

Indeed, failing to comply with the formalities can result in costly and protracted legal proceedings that can cause substantial delays and stress among family members.

For an example of a nomination failing to comply with the requisite formalities see our article on Munro v Munro [2015] QSC 61.

Inflexibility in changing circumstances

One potential drawback of BDBNs is in relation to their inflexibility. A member’s circumstances can change over time, potentially leading to unintended outcomes if where an existing BDBN is not reviewed and updated periodically. It is crucial to recognise that BDBNs do not automatically adjust to evolving situations. Take, for example, a young parent who makes a BDBN in favour of their two young children and then a year later a new child is born. If the BDBN is not updated before the parent’s death, the latest family member would not be entitled to any of the superannuation benefits.

Advantages of non-binding nominations


If the successor trustees/directors to the SMSF are trusted, a non-binding nomination allows flexibility when dealing with the member’s super benefits at the time of their death. Individuals that are unsure about the distribution of their assets due to evolving relationships, possible changes of beneficiaries or shifting rules and circumstances can rely on the trustee/directors to make an appropriate decision. For instance, if the young parent described above lists all their children as at the date of making the nomination in a non-binding nomination but does not include the newborn, the trustee can decide on an equal sharing between all three children.

Disadvantages of non-binding nominations

Lack of certainty

The primary downside of a non-binding nomination is the lack of certainty regarding how death benefits will be distributed. The ultimate decision will rest with the trustee, who must consider various factors, including all potential beneficiaries at the time of the member’s death. Although the trustee will be required to take into consideration the non-binding nomination, the trustee may or may not decide to follow the member’s stated wish and the member will have no ultimate control over this decision-making process. Naturally, ensuring smooth succession to a trusted person who will take control after the member’s loss of capacity or death is critical in this regard.

For an article on succession to directors of a company, see our article: Preserve the intended control of a company using successor directors.

DBA Lawyers’ BDBN service

We offer a streamlined BDBN service where one of our SMSF lawyers prepares the relevant documentation for a BDBN based on review of the member’s instructions. This service includes:

  • Covering letter and BDBN completion checklist
  • The member’s nomination
  • Trustee resolutions
  • Notification letter
  • Memo outlining key information on BDBNs.

We can also provide advice and other assistance including our SMSF Succession Diagnostic Service where one of our senior lawyers reviews relevant background documents and instructions and provides feedback on the clients SMSF succession plans to help them achieve their objectives with as much certainty as possible and minimising future risk of legal challenge.


DBA Lawyers recognises the seriousness in making appropriate death benefit nominations. We make sure that our documents are prepared with clear and soundly based strategies that are legal and valid. We have gained valuable experience and insight from regularly assisting clients with succession planning and especially in assisting in many disputes and litigation matters where SMSF deeds, BDBNs and similar documents are closely scrutinised by opposing sides in court.

Naturally, please contact us if we can be of assistance.

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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional. The above does not constitute financial product advice. Financial product advice can only be obtained from a licenced financial adviser under the Corporations Act 2001 (Cth).

Note: DBA Lawyers presents monthly online SMSF training. For more details or to register, visit or call 03 9092 9400.

For more information regarding how DBA Lawyers can assist in your SMSF practice, visit

By Daniel Butler, Director ([email protected]), William Fettes, Senior Associate ([email protected]) and Cassandra Hurley, Lawyer ([email protected]).


30 October 2023

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