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When should you consider having a specifically tailored BDBN?

Many BDBNs merely nominate one person as part of a simple pro-forma nomination (eg, the person’s spouse or children) without any further direction being given. These standard form nominations are generally incapable of addressing more complex issues such as the examples provided below.

Where nominated beneficiaries predecease the member

In the case of a couple with children, a BDBN can be used to distribute super to the children equally should both spouses fail to survive. However, if a child predeceases the member leaving children of their own, then these grandchildren are generally not ‘dependants’ in respect of the deceased for super purposes. Thus, a benefit that is purportedly directed to the grandchildren in these circumstances will fail unless it is paid to the member’s estate to be dealt with in accordance with the person’s will. These potential outcomes require careful consideration and tailored drafting of a BDBN and will.

Where BDBN documents are rendered ineffective and non-binding

There are numerous points of weakness whereby standard BDBN documents can be rendered ineffective and non-binding. One of the most common points of weakness for a BDBN is where the governing rules of the SMSF and/or the BDBN documents incorporate the BDBN requirements in reg 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (Cth), including the 3 year sunset provision. Accordingly, many BDBNs will expire at the end of 3 years and once that time has elapsed, a person can be left without any BDBN unless an indefinite or non-lapsing BDBN is used with an appropriately drafted SMSF deed.

DBA Lawyers’ SMSF and BDBN documents

Naturally, DBA Lawyers’ SMSF and BDBN documents address the above issues as they allow for effective cascading nominations to be made that do not lapse after 3 years. DBA Lawyers’ SMSF governing rules expressly exclude the BDBN requirements in reg 6.17A so indefinite, non-lapsing nominations are possible. Nevertheless, we recommend that a person’s BDBN and estate plans should generally be reviewed at least every three years and revised if necessary.

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