About the SMSF - Deed Update Asset Protection & B/Nomination

Fully compliant with 1 July 2007 Commonwealth legislation being the "Plan to Simplify and Streamline Superannuation"


Why amend your Self-Managed Superannuation Fund ("SMSF") to include Binding Nominations?

This SMSF Variation document will amend your SMSF to allow you to make Binding Nominations.

When you die, the Trustee of your Super Fund decides on the dependants that receive your Super. Many people are blissfully unaware that their entire Super, and often their insurance benefits, are up for grabs amongst the dependants that they leave behind.

Does your SMSF deed allow the Members of the Fund to make a binding nomination? If not, then the person you have nominated as the beneficiary of your super when you die, may not end up getting the money you planned to give them.

Do you trust the Trustee of your SMSF to do the right thing after you die? Do you want to override the Trustee’s discretion? If so, then you should amend your Trust Deed to allow for binding nominations. Binding nominations mean that the Trustee is obliged to follow your nomination. You should discuss with your Adviser whether binding nominations are appropriate for your circumstances.

Example

Andrew and Helen had 4 children. Between them, Andrew and Helen had $1.5 million in a SMSF. Three months ago, their eldest son, Michael, asked his parents if he could join their SMSF. Their Adviser told them that to comply with Superannuation legislation, Michael had to become a Trustee of the SMSF if he was to become a Member.

Last month, Andrew and Helen went on a car trip around Australia. While crossing the Blue Mountains, they were involved in a head-on collision, and were both killed.

Michael was nominated as the Executor of Andrew’s and Helen’s Will. Andrew and Helen had nominated all their four children as beneficiaries to receive the proceeds of their super upon their death.

The sole surviving Trustee of the SMSF, Michael, was not communicating with his brothers and sisters, and had developed a taste for the high life.

Without a Binding Nomination, a Trustee has absolute discretion in distributing death benefits from the Super Fund. Michael had a free reign over who got Mum and Dad’s Super, and how much of it. He exercised his discretion as the Trustee and the Executor of his parents’ Wills to pay out the $1.5 million to himself. He bought himself a new red Ferrari and drove off into the sunset, while his parents turned in their graves and his siblings were left dumbfounded and helpless to stop him.

Under Superannuation law, the Trustee of your Super Fund has the discretion and obligation to use this power. At this stage you might say to yourself: this does not apply to me - I have nominated my beneficiaries.

Are your bases covered? You certainly thought so. Are you the next Andrew and Helen?

You can overrule the Trustees’ discretion, and truly have the final say about who receives your death benefit. You can ensure that your Super is paid, as you want, after your death. This new Super feature is called Binding Death Benefit Nominations (Binding Nominations). This document allows you to incorporate the option of making a Binding Nomination into your SMSF deed.

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