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On 25 March 2015, the Queensland Supreme Court in Munro v Munro [2015] QSC 61, handed down a decision in which a document that was expressed to be a ‘binding death benefit nomination’ (BDBN) was found to be invalid, allowing the trustees of the SMSF to distribute the deceased’s death benefit other than as set out in the BDBN.
Mr Munro (a solicitor) signed a document that was stated to be a ‘binding death benefit nomination’ for his benefits in his SMSF in favour of ‘Trustee of Deceased Estate’. The remaining trustee (Mr Munro’s wife) and her daughter (who was appointed as a co-trustee after Mr Munro’s death) decided to pay the death benefit to Mrs Munro on the basis the BDBN was not valid.
Two of the executors of Mr Munro’s estate applied for a declaration that the nomination form signed by Mr Munro was a binding death benefit nomination under clause 31.2 of the trust deed.
The Court held the BDBN was not valid as it did not comply with the requirements in the trust deed. The Court emphasised that the BDBN would only be binding if it strictly complied with all the requirements of the trust deed. In this case, the nomination was to ‘Trustee of Deceased Estate’. The Court determined that this was not a nomination of the deceased’s ‘legal personal representative’ (as required by the trust deed) as the roles were different.
As a result, the trustees of the SMSF could pay the deceased’s death benefit to Mrs Munro.
The Court also decided that a BDBN in relation to benefits in a SMSF does not have to comply with the requirements in the Superannuation Industry (Supervision) Act 1993 and Regulations (unless the trust deed requires that).
This case is another reminder of the importance of carefully drafting a BDBN so that it complies with the specific requirements in the trust deed and being precise in the nomination of the appropriate beneficiary.
If you have any queries regarding BDBNs, please contact Scott Hay-Bartlem on +61 7 3231 2458 or Clinton Jackson on +61 7 3231 2451.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.
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