Sleeper requirements of BDBNs – signing is no longer enough | October 2017

 

The latest case from SA was a single member SMSF involving the brother and cousin of the deceased member. The brother controlled the corporate trustee and their cousin was the executor of the deceased member’s estate.

The Court action started with the executor asking for the Court to declare that the trustee was bound by the BDBN. The brother, as trustee of the Fund, argued that the most recent BDBN was not valid or effective (a previous BDBN paid the member’s death benefit to his siblings).

The brother’s argument as to why the BDBN wasn’t valid was based on the fact that it had not been given to the trustee in accordance with the trust deed requirement. This indicates that BDBNs will be scrutinised with not only the signing requirements being contested in order to ‘bring down’ an otherwise valid BDBN.

The trust deed here defined a beneficiary nomination to include a ‘written nomination given by a Member to the Trustee.’ There was nothing further within the trust deed to prescribe the method of delivery that was required for the nomination to be valid or effective.

This case turned upon whether the BDBN had been given to the trustee of the Fund; it was considered whether service was required in accordance with the Corporations Act, but was later accepted that ‘given’ should be construed using its ordinary meaning.

The BDBN was signed and retained by the Accountant for the deceased member, after having been witnessed by two employees. The registered address of the corporate trustee was, you guessed it; the Accounting firm’s address.

The conclusion was that the BDBN was given to the corporate trustee in that it was left at its registered office, with the accountants engaged for the corporate trustee and it was therefore valid and effective.

The Judge said that the Accountants who witnessed the document took possession of it and filed it for the purposes of both the corporate trustee and the deceased member. Further the Judge determined that the Accountants were duty bound to keep the BDBN safe for and to bring it to the attention of their client; the corporate trustee.

Don’t allow a BDBN to unravel because the trust deed wasn’t followed. Signing the BDBN is not enough to provide certainty for the payment of death benefits, so ensure that the right advice is received because every trust deed is different!

Contact Partners Legal on 1800 333 143 if you would like to discuss your death benefit and estate planning strategy involving an SMSF.

 

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.