Your Super Benefit does not form part of your Estate

Under current Superannuation Laws, your Super Benefit does not form part of your Estate on your death. This means that your Super Benefit will not be automatically distributed in accordance with your "Will" on your death.  So in the event that you do not have a Binding Death Nomination in place of your death (see below), your Super Benefit will be distributed in accordance with the provisions of your SMSF Trust Deed.  The SMSF Trust Deed used by ESUPERFUND currently states that to the extent that no Binding Death Nomination has been made to your SMSF prior on your death, your Super Benefit may be distributed in accordance with the discretion of the remaining Trustees of the SMSF.  This may or may not comply with your intentions and more importantly may result in an unfavourable tax outcome.  In addition the remaining Trustees may disagree on how to distribute your Super Benefit on death creating legal issues most of us would prefer to avoid.  To avoid these complications it is strongly recommended that all Members of a SMSF execute a Binding Death Nomination once their SMSF has been established.

Binding Death Nomination

To ensure that your Super Benefit is distributed in accordance with your wishes on your Death you must make a Binding Death Nomination.  A Binding Death Nomination "binds" the Trustees of your SMSF to pay your Super Benefit as you intend and not at the discretion of the Trustees.  To ensure that the Binding Death Nomination is valid the following must be adhered to:

The Trust Deed of your SMSF must permit the Binding Death Nomination (our Trust Deed is compliant)
The Nomination must be in writing
The persons noted in the Nomination must be made to Permitted Beneficiaries (see below)
The amount to be paid to each person must be clearly specified
The nomination is valid for only three years
The nomination must be signed and dated in the presence of two witnesses over 18 neither of whom is nominated to receive a benefit

Avoid Exposure of your Super Benefit to Legal Action

The classic example of what can go wrong if you do not execute a Binding Death Nomination, is the case Katz vs Grossman, which stemmed from the death of Ervin Katz in 2003. In that case, the father (Katz) had been the sole remaining member of a SMSF. After his wife's death, he appointed his daughter as an additional trustee to the SMSF to allow the SMSF to continue. Before he died, he also indicated as part of his Will that he wanted to leave the money equally to his son and daughter. He did not complete a Binding Death Nomination which must be executed in a very specific way.  After the death of Ervin Katz, his daughter had her husband join as a SMSF Member, which gave them control of the SMSF. The daughter then refused to pay her father's benefit according to the terms of her father's non binding request, triggering legal action by her brother (Ervin Katz's son). The Court Case cost several hundred thousand dollars in legal fees, but by not adhering to her father's request the daughter did not break the law. She had full control.  All the above could have been avoided with a simple Binding Death Nomination. In that case the benefit must be paid in accordance with the father's intentions. The daughter in the above case would have had no control over the benefit.

Permitted Beneficiaries

Under a Binding Death Nomination, you can nominate the following beneficiaries to receive your Super Benefit on death.  Each beneficiary is further explored here.

Spouse (includes former Spouse, DeFacto and same sex couples)
Child (including an adopted or step child)
Any Person who was a Dependent just before death (ie relied on you for financial maintenance)
Any Person with whom you had an 'Interdependency Relationship' just before death 
Your Estate via your Legal Personal Representative (this is usually the Executor of your "Will")

Who keeps the Binding Death Nomination?

When you apply for a Binding Death Nomination ESUPERFUND will send you three copies of the Binding Death Nomination documentation.  The Binding Death Nomination should be maintained by three parties to ensure your intentions are followed.   A copy should be kept by you, a copy should be kept by the SMSF Administrator (ie ESUPERFUND) and a copy should be kept by your legal representative who prepared your "Will" for you. 

Update every 3 years

A Binding Death Nomination is only valid for three years.  Accordingly the Binding Death Nomination must be updated every three years to ensure it remains valid.

Payment of Super Benefit on Death

When you die your Super Benefit must be paid to the nominated beneficiaries (if there is a Binding Death Nomination in place) or by the remaining Trustees at their discretion (if there is no Binding Death Nomination in place) as soon as practicable after the Member's death.  There are no legislative guidelines on what constitutes "as soon as practicable" and is generally assumed to be within 6 to 12 months after death.

Binding Death Nomination Fee

It is FREE to implement a Binding Death Nomination with ESUPERFUND.

Apply Now

To implement a Binding Death Nomination for each member of your SMSF simply visit and submit an online application here.