Superannuation Binding Death Benefit Nominations – Why is it a topical discussion point

On Wednesday 15^th June 2022, the High Court handed down its judgment in the matter of Hill v Zuda Pty Ltd.   The decision has confirmed the widely held view that a self-managed superannuation fund is not subject to regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (‘the Regulations’).

Background

Mr Alec Sodhy and his de facto partner Ms Jennifer Murray were each a member of the Holly Superannuation Fund and directors of its corporate trustee Zuda Pty Ltd.

On 13 December 2011, an amendment was made to the Trust Deed to insert a clause described as a “binding death benefit nomination” (“BDBN”).  The effect of this clause was that if either Mr Sodhy or Ms Murray died, the trustee was required to distribute the death benefit payable to the survivor.

Mr Sodhy died on 26 November 2016.  His only child, Ms Claire Hill contended that the BDBN was invalid as it failed to comply with regulation 6.17A of the Regulations.  It was not disputed that the BDBN was not in accordance with regulation 6.17A.

Regulation 6.17A

Regulation 6.17A sets out the requirements for a member to provide a notice as to the payment of death benefits, commonly known as a binding death benefit nomination.  These include that the nomination:

• Must be in writing
• Must be signed and dated by the member in the presence of 2 witnesses over the age of 18 who are not mentioned in the notice;
• Contain a declaration signed and dated by the witnesses stating that the notice was signed by the member in their presence.

Further, the notice expires 3 years after the day it was first signed, or last confirmed or amended by the member (or such shorter period provided by the governing rules).

Decision

The Court held the regulation 6.17A does not apply to self-managed superannuation funds.

Consequences of the decision

In practice, this provides clients and their advisors certainty that, provided that it is permitted by and in compliance with the terms of a SMSF Trust Deed and superannuation law, a non-lapsing BDBN will be held to be valid.

A binding death benefit nomination should always be prepared as part of the estate planning process and should be prepared by a lawyer experienced in the area.

At Keypoint Law we have a team of experienced Wills and Estates Lawyers.  If you wish to discuss any aspect of this client alert or require expert assistance or advice, please do not hesitate to contact us.

This article is not intended to constitute and should not be treated as legal advice.