In life, we often find ourselves juggling various responsibilities – work, family, finances, and planning the future. While it may not be the most pleasant topic to ponder, it’s crucial to think about what will happen to our loved ones and our hard-earned assets after we’re gone. One way to ensure your wishes are carried out and to provide financial security for your family is through a Binding Death Benefit Nomination (BDBN).
A BDBN is a legal document that directs how your superannuation benefit will be distributed upon your death. It provides clarity and certainty in terms of the distribution of your super, ensuring your loved ones are taken care of financially in your absence.
Typically, a BDBN will outline the specific beneficiaries who’ll receive your super, the proportions in which they’ll receive it, and any conditions that need to be met for the distribution to occur. Alternatively, you may wish to direct your superannuation proceeds to your legal personal representative to be disbursed as part of your estate. It’s important to note that a BDBN only covers your superannuation benefit and doesn’t deal with other assets or financial matters.
Without a BDBN the trustees of your super fund may have the discretion to distribute your super in a way that may not align with your intentions. This could potentially leave your loved ones financially vulnerable or result in family disputes over the distribution of your superannuation benefit.
Benefits of Having a BDBN in Place
Security and Peace of Mind
One of the greatest advantages of having a binding death benefit nomination is the security it provides. By specifying exactly who should receive your superannuation benefits, you can have peace of mind knowing that your loved ones will be taken care of. It ensures your hard-earned money will be allocated according to your wishes, providing you and your loved ones with the security you deserve.
Avoiding Potential Disputes
Money can often become a sensitive topic, especially during emotional times like the passing of a loved one. By clearly outlining your wishes and having a legally binding document, you can minimize the chances of disputes arising among family members.
Control Over Your Superannuation Benefits
By specifying the beneficiaries, you have full control over who receives your superannuation benefits. This control allows you to ensure that your assets are passed on to the individuals or entities that matter the most to you. Whether it’s your spouse, children, or a charitable organization, you have the power to make this decision.
Tax Implications and Benefits
Specifying the beneficiaries can potentially minimize the tax implications associated with superannuation benefits. It’s important to consult with a financial advisor or tax professional to fully understand the tax implications and ways to optimize the benefits for your specific situation.
Legal Requirements for a Valid BDBN
For your BDBN to be legally binding, it must meet certain requirements. Firstly, it must be in writing and signed by you in the presence of two witnesses who are over the age of 18 and not named as beneficiaries in your BDBN.
Furthermore, your BDBN should clearly identify the beneficiaries and the proportions in which they are to receive your superannuation benefit. It’s essential to ensure the nomination is up to date and valid, as outdated, or expired nominations may not be enforceable.
Beneficiaries that are eligible to be included in your BDBN are restricted under law to one of the following categories:
- Your spouse or a de facto partner
- Your children
- A person you have an interdependent relationship with (someone you live with and have a close personal relationship with including domestic support and personal care)
- Someone who is financially dependent on you
Reviewing and Updating Your Binding Death Benefit Nomination
Life is full of changes, and as such, it’s crucial to review and update your BDBN periodically. Whether it’s an addition to your family, a change in your relationship status, or alterations to your financial situation, these events may require an adjustment to your BDBN.
You’ll need to renew your BDBN every 3 years – it’s important that you ensure your BDBN accurately reflects your current wishes and circumstances. By doing so, you can ensure that your intentions are clearly communicated, and your loved ones are provided for, even in the face of changing circumstances.
A Binding Death Benefit Nomination provides financial security and peace of mind for you & your loved ones. If you require assistance with the BDBN process or have questions – contact our estate planning team today.
