Key things to know about your SMSF binding death benefit nomination

Your self-managed super fund (SMSF), unlike your home, is not something that will likely automatically be passed on to your family members. Your trustee (as chosen by you) will pay a death benefit to your nominated parties as per the governing rules of your fund and in conjunction with legal requirements.

So, what is a death benefit nomination?

When a SMSF member dies the SMSF usually pays a death benefit to nominated beneficiaries of the deceased member. In order to make sure your SMSF is awarded to the people you want to receive it, a death benefit nomination is legally binding instruction to advise your trustee to whom you would like your death benefit to paid to. These nominated parties would usually be dependants or other beneficiaries as chosen by you. Dependants will receive the death benefit in a lump sum or an income stream, whereas, non-dependants will only be able to receive as a lump sum.

The difference between binding and non-binding death benefit nomination

If your death benefit is non-binding then your trustee is not required to follow the instructions you lay out – either in the death benefit or your will. Binding nomination, however, means that you choose where your money goes in the event of your death. With a non-lapsing binding nomination you can rest assured your money is dealt with as per your wishes.

Why is it important to me?

Firstly, this means you can either leave money to specific dependants or other nominated persons, which is a distinct advantage to having a binding death benefit nomination. Secondly, as you have taken the time and care to have a SMSF, it would no doubt be preferable to know that your money will end up being used in the way you had hoped instead of in the wrong hands.

What about the advantages & disadvantages?

There are several advantages to having a binding death benefit nomination .

  • Advantage – You can either choose to have your money go to specific beneficiaries such as dependants – your spouse, partner, children, step-children etc. or you can leave the money to the legal representative who must pay out the money as laid out in your will.
  • Advantage – If you choose to have a non-lapsing binding death benefit nomination for your SMSF you will not have to worry about the instructions lapsing after the standard time of three years.
  • Disadvantages – If you have a lapsing binding death benefit nomination (as opposed to a non-lapsing one) your SMSF may still end up not going to your nominated parties IF you do not update the binding nomination every three years. Basically this is because the law says that after three years, any binding death benefit nomination expires. And after it expires the trustee can once again do as they wish (essentially reverting your SMSF to a non-binding nomination).

Other useful links (ATO and Smartgov)

You may also like to read more about SMSF death benefit nomination at these links:

https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/insurance-through-super/super-death-benefits

https://www.ato.gov.au/super/self-managed-super-funds/paying-benefits/death-of-a-member/

If you have any questions or concerns about your SMSF, please call our friendly staff on 1300 736 453.

Disclaimer: This information should not be considered personal financial advice as it is intended to provide general advice only. This factsheet has been prepared by Superhelp Australia Pty Ltd without taking into account your personal objectives, financial situations or needs.

The information contained in the fact sheet may not be appropriate to your individual needs, therefore, you should seek personal financial advice before making any financial or investment decisions.

Book Your Free SMSF Consultation

Book your free consultation with me to find out if SMSF is right for you. If you have any other questions, we are happy to help!

 

Sandra - SMSF Advisor

8 + 1 =

Can SMSF Lend Money to a Third Party?

Introduction: Navigating the complexities of Self-Managed Super Fund (SMSF) regulations is crucial for trustees who aim to maximize their fund's potential while remaining within the legal framework set by the Australian Taxation Office (ATO). A common question that...

Can SMSF Lend Money?

The Rules and Opportunities around SMSF lending Self-managed super funds (SMSFs) offer Australians a unique way to control their retirement savings, but with great power comes great responsibility, including understanding the legalities and regulations surrounding...

Can SMSF Borrow Money? Exploring the Possibilities and Limitations

Self-Managed Super Funds (SMSFs) have become a popular choice for Australians looking to take control of their retirement savings. As trustees seek to maximize their fund's potential, a common question arises: Can SMSF borrow money? The answer is yes, but it's wrapped...

What Does SMSF Stand For? A Deep Dive into Self-Managed Super Funds

When it comes to planning for retirement, Australians have a variety of superannuation options available to them. Among these, one option stands out for those who seek more control over their retirement savings: the Self-Managed Super Fund (SMSF). But what exactly...

How much do you need to retire in Australia?

Retiring in Australia can be a dream come true, but it's important to have a clear understanding of how much money you will need to support yourself during your golden years. The amount you need to retire in Australia depends on several factors, including your...

SMSF Director ID

The SMSF (Self-Managed Super Fund) Director ID is a unique identifier that is assigned to individuals who act as directors of SMSFs. This identifier is used to monitor and regulate SMSF trustees and ensure that they are fulfilling their obligations under the...

What types of people have an SMSF?

There are many different types of people who have an SMSF. Some of the most common include: Small business owners: Many small business owners choose to set up an SMSF to help manage and invest their retirement savings. This allows them to have more control over their...

Commercial SMSF Loans – What you need to know

Securing a commercial loan for an SMSF can be complex due to the variety of lenders and options available. Whether you're a first-time borrower or an experienced borrower, it's important to understand the nuances of the loan process when applying for a commercial SMSF...

Is SMSF right for you?

Before deciding to set up an SMSF, it is important to consider whether it is the right choice for you. An SMSF is a type of superannuation fund that is run by its members, who are also the trustees. This means that the members have complete control over the investment...

How to Complete Your SMSF Tax Return

SMSF trustees are responsible for managing their own superannuation funds, which means they are also responsible for ensuring that their SMSF complies with all the relevant laws and regulations. One of the most important compliance requirements for SMSFs is the...

Contact Us

SuperHelp is located in Macquarie Park, NSW however we work with clients all around Australia.

info@superhelp.com.au

1300 736 453

PO Box 1906 Macquarie Centre NSW 2113

M-F: 9am-5pm, S-S: Closed

2 + 7 =