A “BDBN” or “Binding Death Benefit Nomination” is an important legal document for anyone who has any form of superannuation.
A common misconception is that your superannuation can be dealt with in accordance with your Will. While that may sometimes be the case, it is important to remember that superannuation does not automatically become an Estate asset.
Rather, who receives your superannuation is determined by the Trustees of your Superannuation Fund. In the absence of a BDBN and subject to the terms of the Superannuation Fund’s Trust Deed, the Trustee of your Superannuation Fund may (on application) make a determination to pay either the whole or part the your superannuation balance to any eligible beneficiary, including:-
1. Your spouse (including de-facto spouse);
2. Your children;
3. A dependent;
4. Someone with whom you have a financially interdependent relationship with; or
5. Your Estate.
This means that the person (or people), who end up with your superannuation, may not be the person (or people) you intended.
The advantage of having a valid BDBN is that it does just that… It binds the Trustee of your Superannuation Fund to pay the balance of your superannuation funds in accordance with your nomination. That way, if you pass away, the death benefits in your superannuation will be paid according to your wishes. This also means that the distribution is less likely to be challenged.
Depending on your superannuation fund, your BDBN should be updated regularly to stay valid.
What happens if there is no valid BDBN? Well, in a recent case, a dispute arose between brother and sister over the distribution of their father’s Estate. Dad had sadly passed away, leaving a valid will dividing his Estate equally between his two children.
At the time of his death, the daughter sole executor of Dad’s Estate. Daughter was also the sole trustee of the father’s self-managed super fund. Dad did not have a BDBN.
Accordingly, Daughter distributed the entirety of Dad’s superannuation death benefit to herself and gave nothing to her younger brother.
Son challenged the distribution on the basis that their Father’s Will clearly stated that his Estate should be divided equally between them.
The Court disagreed and held that, as there was no BDBN, the daughter, as sole trustee of the superannuation fund was entitled to distribute the benefit entirely to herself. There was no obligation on the daughter to pay the death benefits from the superannuation fund to the Estate to be divided with her brother in accordance with Dad’s Will.
Net result… Son and Daughter still received 50% each of the Estate… but the daughter also received all of Dad’s superannuation.
Probably not the outcome Dad wanted, and a timely reminder to us all to contact our superannuation funds and organise our BDBN's now.