Doing the legal prep for your own passing or incapacity isn’t the most cheerful task, but it is far too important to put off.
Everybody (hopefully) knows they need a will, and most even know about powers of attorney and enduring guardians – but what about a Binding Death Benefit Nomination (BDBN)? In my experience, most people haven’t even heard of it! This news is surprising to me because BDBNs are just as important for distributing your assets when you die.
This article will outline the basics of what you need to know about BDBNs and why you should consider one for yourself.
What happens to my superannuation?
When you pass away, the trustee of your super fund has the obligation and discretion to decide who of your dependents will receive your super. You may be thinking this doesn’t apply to you because you’ve nominated your beneficiaries, but there is more to consider.
The plus side of your trustee having this discretion is that they can take into account new family members or spouses, if you never got around to updating your nomination forms. On the flipside, however, this could mean someone you no longer wish to receive a benefit – such as an “ex” – could do so if you never removed them as a beneficiary.
The good news is that you can overrule the discretion of your trustee and truly have the final say about who receives your benefit. This is where the value of the BDBN comes in.
What is a BDBN?
A BDBN is a written direction to your trustee which states who you wish to receive your superannuation benefit when you die. If your BDBN is in effect and valid when you die, your trustee must pay your benefit to your nominated beneficiaries in the proportions you have specified in your BDBN.
A BDBN is not compulsory, but you should consider the benefits before dismissing one. The main benefit of having a BDBN is that you will have certainty about who will receive your super (including any insurance amounts) when you die. You can decide who gets what in the exact proportions you desire. This will make your estate planning much more precise and effective.
Who can I nominate?
You can nominate to assign your benefit to any of your dependants, as defined under superannuation law. This includes your current spouse (husband, wife, or de facto), your children (including adopted children), or any other person financially dependent on you at the time of your death. Only the nominees who are dependent at the time of your death will receive a benefit. Alternatively, you can nominate your estate (the assets in your will). This is the most tax effective method.
What if I have already nominated a beneficiary?
Any nominations you have made prior to 1999 are not binding on your trustee. They can take them into account when exercising their discretion, but unless you make a BDBN, they are not bound to follow them. You can override any previous nominations by making a BDBN at any time before your death.
Does a BDBN last forever?
No. A BDBN is only effective for 3 years after you make it. You can change or revoke your BDBN at any time by completing a new BDBN and sending it to your super fund. It is important to note that if your BDBN expires and is not renewed, your super is no longer paid under the discretion of your trustee. Rather, your super will automatically be paid to your estate. So if you do not wish for this to happen, it is important that you keep a tab of the expiry of your BDBN and have it renewed on time.
I need help! – Where can I get it?
You may want to speak to a lawyer to learn about the legal implications of your options.
By doing so, you can achieve peace of mind in knowing that your loved ones will be looked after and will receive the greatest possible benefit form your hard-earned super.
Do you know someone who has completed a BDBN? Share with us in the comments.