Many trustees assume that because they have a will, their superannuation is covered. It is not. Your super, including your SMSF balance, sits outside your estate unless you have specifically arranged for it to be dealt with in a particular way. Getting this wrong is one of the most common, and most consequential, estate planning gaps we see in SMSFs, often discovered by a grieving family at exactly the wrong time.
Why Your Will Does Not Control Your Super
Your SMSF is governed by its trust deed and superannuation law, not by your will. Without a valid binding nomination in place, the trustee of your fund, which after your death may be a surviving member, an appointed replacement trustee, or your legal personal representative, has discretion over who receives your death benefit and in what form it is paid. That discretion may not align with what you actually wanted.
What Is a Binding Death Benefit Nomination?
A binding death benefit nomination, or BDBN, is a formal instruction to the trustee of your SMSF about who should receive your benefit when you die, and in what proportions. When validly made, in accordance with both superannuation law and your fund’s specific trust deed, it removes trustee discretion entirely and ensures your benefit is paid as you directed.
Lapsing vs Non-Lapsing Nominations
Some BDBNs lapse after three years unless renewed, requiring the member to actively re-sign and resubmit the nomination. A fund’s trust deed may instead allow for a non-lapsing nomination that remains valid indefinitely, removing the risk of a nomination quietly expiring without the member realising it.
Reversionary Pensions
If you are already in pension phase, a reversionary pension nomination is a separate mechanism that allows your pension to automatically continue to a nominated beneficiary, such as a spouse, upon your death, rather than being commuted and paid out as a lump sum. Whether a reversionary pension or a BDBN, or some combination of the two, is more appropriate depends on your circumstances, your fund’s structure, and your broader estate and tax planning objectives.
Enduring Power of Attorney
Estate planning for an SMSF is not only about what happens after death. An Enduring Power of Attorney, or EPOA, allows someone you trust to step in as your representative if you lose capacity during your lifetime, which matters significantly for SMSF trustees specifically, since a member who loses capacity generally cannot continue acting as a trustee themselves without a valid EPOA in place.
What Happens Without These Documents in Place
Without a valid nomination, EPOA, or clear trust deed provisions, families can face delays, disputes, and outcomes that do not reflect what the fund member actually intended. We have seen SMSF disputes arise specifically because these documents were never put in place, or were prepared without proper reference to the fund’s actual deed.
A Common Scenario We See
Consider a blended family, where one spouse has children from a previous relationship. Without a valid, deed-compliant BDBN, the surviving spouse, acting as trustee, could lawfully exercise discretion to pay the entire death benefit to themselves, potentially leaving the deceased member’s children from the earlier relationship with nothing from the SMSF, regardless of what the member may have intended. A properly prepared and validly executed BDBN removes that discretion entirely and directs the benefit exactly as the member specified.
How These Documents Work Together
A properly coordinated SMSF estate plan generally involves reviewing your trust deed to confirm what it actually permits, then preparing a BDBN, reversionary pension nomination, or combination that both the deed and superannuation law support, alongside a current EPOA and a will that is drafted with awareness of what your super arrangements already cover.
How New Wave SMSF Helps
Our legal team prepares and reviews binding nominations, reversionary pension documentation, and EPOAs as part of a coordinated estate plan for your SMSF, aligned with your trust deed and your broader financial and family circumstances.
Frequently Asked Questions
Does my will cover my superannuation?
Not automatically. Superannuation, including SMSF benefits, generally sits outside your estate and is instead governed by your fund’s trust deed and any valid nomination you have made.
What happens if I do not have a binding death benefit nomination?
The trustee of your fund retains discretion over who receives your death benefit and how it is paid, within the bounds of superannuation law and the fund’s trust deed.
How often do I need to renew a BDBN?
This depends on your fund’s trust deed. Some deeds only allow lapsing nominations, which expire after three years unless renewed, while others allow non-lapsing nominations.
Can I nominate anyone as my death benefit beneficiary?
No, superannuation law restricts valid nominations to specific categories, generally your spouse, children, financial dependants, individuals in an interdependency relationship with you, or your legal personal representative.
What is the difference between a BDBN and a reversionary pension?
A BDBN directs a lump sum or income stream benefit to a nominated beneficiary after your death. A reversionary pension automatically continues an existing pension to a nominated beneficiary without needing to be recommenced.
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This article is general information only and does not take into account your personal objectives, financial situation, or needs. It does not constitute financial, tax, or legal advice. Estate planning documents should be prepared with qualified legal advice specific to your circumstances. New Wave Financial Planning Pty Ltd is an Authorised Representative of NWG Financial Services Pty Ltd, AFS Licence No. 538619. Please speak with your New Wave SMSF adviser before acting on any information in this article.