The will power of binding death nominations


There have been many articles in the media on disputes between SMSF trustees who are members of the same family. Judging by the outcomes, my recommendation is to put formal arrangements in place if you want your wishes to be respected in the event of your death.

Contrary to popular belief, superannuation assets do not automatically form part of a person’s estate pursuant to a will. If you want your superannuation to be distributed as part of your estate, you will need to check the wording of the Trust Deed and create a binding death benefit nomination (BDBN).

The way superannuation savings will be paid from an SMSF, in the event of death, is based on the SMSF’s Trust Deed. As well as stating how your benefits can be received by you while you’re alive, it should spell out how they will be distributed when you die.

The complication with SMSFs is that under superannuation law, it is not compulsory for an SMSF to have a BDBN. Without it, the surviving members in your SMSF determine who your benefit will be paid to. This may not be a problem if there is only you and your spouse and both want each other as beneficiaries. But what if you want some or all of your superannuation to go to your children?

As the BDBN is not compulsory, there are no restrictions on what it can contain. Normally a BDBN needs to be witnessed by two individuals who are not beneficiaries to the estate. It also needs to be updated every three years for it to remain valid, but even here there are exceptions. The SMSF Trust Deed can spell out under what terms a BDBN will be accepted. For example, it can offer a BDBN that does not have to be updated on a regular basis (a non-lapsing binding nomination) or does not need to be witnessed by two people. A non-lapsing nomination remains valid until the member changes it or revokes it. Please talk to a lawyer on what you should put in your Trust Deed as well as in a BDBN.

The two court decisions described below show how disputes were resolved both with and without a BDBN.

Ioppolo & Hesford v Conti [2013] WASC 389

Mr and Mrs Conti were trustees of their SMSF but were estranged. Mrs Conti made a will stating her superannuation entitlements were to go to her four children and expressly stated she did not want any of it to go to her estranged husband. She did not have a BDBN. The terms of their Trust Deed were that in the absence of a BDBN, the surviving trustee could use their discretion to pay the benefit. Mr Conti paid Mrs Conti’s benefit to himself. Mrs Conti’s children took action against their father. The court ruled in Mr Conti’s favour as he acted within the requirements of the trust deed. Mrs Conti’s will carried no weight in the court’s decision.

Wooster v Morris [2013] VSC 934

Mr Morris and his second wife were trustees of their SMSF. Mr Morris made a BDBN in March 2008 in favour of his daughters from his first marriage. Mr Morris died in February 2010. Mrs Morris decided that the BDBN was not binding and paid herself all of Mr Morris’ superannuation entitlement. The daughters took action against her. The court found in favour of the daughters, but because Mrs Morris controlled the SMSF, it took many years for Mr Morris’ daughters to claim their benefit and their court costs. Unfortunately Mrs Morris died and her estate filed for bankruptcy which consequently left the daughters with a large shortfall in their entitlements.

In conclusion, the correct wording in both an SMSF’s Trust Deed and a BDBN are critical to ensure that your wishes are carried out in timely manner.


Monica Rule is the author of The Self Managed Super Handbook. Monica is running an SMSF seminar in Sydney on 7 November 2014, with special guests Noel Whittaker, Graham Hand and Chris Cuffe. For more details visit

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4 Responses to The will power of binding death nominations

  1. Ramani October 3, 2014 at 4:46 PM #

    A worthwhile contribution to the vital need for savers to calmly contemplate their imminent or eventual mortality and order things in advance. In addition to the valid points made, the taxation of beneficiaries must be considered. Perhaps Monica could do a sequel?
    While the article refers to SMSFs, the issue is significant for APRA funds. Trustees unaware of complex member relationships and dependencies can only make decisions based on available information, not a forensic foray across the globe. The death benefit disputes which end up in SCT cost trustee time and money in this uncapitalised industry, eroding other members’ savings.
    About time we deal with the resulting inefficiency and leakage.

    Mandate BDBN rather than leave it to discretion and dispute?

    • Jon B October 7, 2014 at 11:16 AM #

      Ramani, whilst BDBN are the best mechanism for ensuring certainty, for some Super Fund members flexibility is the key consideration, when a binding nomination might not be appropriate. The key is for members to understand the outcomes likely given the members will, nominations, and Bindings nominations. JB

  2. Leisa October 3, 2014 at 11:07 AM #

    I’m interested to know if the estate can be nominated in a BDBN ensuring it is distributed as per the will. Or does the beneficiary of a BDBN need to be a living person or persons?

    • Tim October 3, 2014 at 4:18 PM #

      In response to Leisa, yes you can nominate the estate.

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