In this edition of It Depends, associate Sarah Camm discusses binding death benefit nominations and the circumstances when they can be challenged.
Sarah will be presenting on this topic along alongside Scott Hay-Bartlem and Clinton Jackson at our Annual Adviser Conference on 26 and 27 March 2026. Only one week left to get your tickets at discounted earlybird pricing.
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Video transcript
Welcome to this week’s edition of It Depends. This week I’m talking about binding death benefit nominations and when someone can challenge them.
Scott, Clinton and I will be talking about these issues and some recent cases we’ve been dealing with at the Annual Adviser Conference on the 26th and 27th of March, in Brisbane.
What is a binding death benefit nomination?
A binding death benefit nomination, or a BDBN, is a direction or an agreement that you have with your superannuation fund or the trustee of your fund about how your superannuation member balance will be paid on your death.
What happens if I don’t have a binding death benefit nomination?
Your superannuation is treated differently to the rest of your assets because you don’t own it personally, the trustee of your superannuation fund holds it for your benefit.
On your death, the trustee of the superannuation fund will make a decision about how the superannuation member balance will be paid. They can pay it to either your spouse, children or in some circumstances, a person that you live with. They can also pay it to your estate.
The terms of your Will will only apply to the payment of your death benefit, if it’s paid to your estate.
If you don’t have a binding death benefit nomination, then it’s up to the trustee of the fund, whoever that might be, to consider those options and then make a decision about how they’re going to pay your death benefit.
If you have a binding death benefit nomination that’s valid, then the trustee has to follow that document.
What makes a binding death benefit nomination valid or invalid?
It depends. The rules of your superannuation fund will govern the minimum requirements of the binding death benefit nomination.
If you’re a member of a retail fund, then there’s also minimum requirements set out in the legislation. For example, you might need to use a specific form. You might need a certain number of witnesses. You might need to give the document to the trustee, in which case you need to prove that you’ve done that.
The important thing is that you follow the terms of the trust deed really precisely. Disputes about binding death benefit nominations are becoming more and more common, and we’re seeing the nominations be overturned on even the most technical imperfections. For example, if you don’t follow the rules precisely or in some cases, if there’s deficiencies in variations to the rules over time. So, perhaps the rules the member was following weren’t actually the right version.
Again, if the document is invalid for any reason, the trustee doesn’t have to follow it and they usually will have to exercise discretion.
We’re also seeing disputes where an attorney signed a binding death benefit nomination on behalf of the member. And then an issue with either the document appointing the attorney or signing that binding nomination is a conflict of interest.
The other issue we’re seeing is where there’s a suggestion about whether the member had capacity to make the binding nomination, where they were signing it themselves.
Where there’s uncertainty about the validity of the binding death benefit nomination, the trustee might need to apply to the court for directions about whether they should follow it.
How does a dispute affect the rest of the estate?
A dispute about the validity of a binding death benefit nomination can have a number of flow on effects for the advisers who prepared it, or for the beneficiary who has to wait longer to receive the benefit of the superannuation balance, or who might not receive that at all, even if that’s what the member intended.
The uncertainty about the death benefit can also make estate litigation more difficult, because the financial position of the estate or of the beneficiaries might change depending on how the death benefit is paid.
On the other hand, the trustee might want to hold off on paying the death benefit until they know how the estate is going to be distributed, because how the estate is distributed might affect the exercise of their discretion. It’s really difficult to advise on how to resolve this chicken and the egg type of scenario in some cases.
If the binding death benefit nomination is invalid, then the trustee needs to take a number of steps to properly exercise their discretion. The executors of the estate have an obligation to try and maximise the estate, so to get the death benefit paid to the estate and increase the assets.
Often in a self managed superannuation fund, in particular, the trustee of the fund, the executor of the estate, and the potential recipient of the death benefit personally are all the same person, which can create a conflict of interest.
In those circumstances, the other beneficiaries might seek to remove the trustee or executor, causing cost and delay, and even leading to outcomes that the member wouldn’t have wanted.
Death benefit disputes are becoming more common, and they’re making estate litigation more complex. For advice about how to get the planning right, or if you have questions about a loved one’s death benefit payments, get in touch with a member of our private clients team today.
