A binding death benefit nomination (BDBN) is a legal document that is designed to tell the trustee of your super fund to which beneficiaries they should pay out your super death benefits in the event of passing away.
Every person in Australia should ask themselves whether they have a BDBN on their super fund. The lack of awareness in this area is concerning and the importance of it should not be under-estimated.
Without a valid BDBN the trustee of the superannuation fund determines who receives your death benefits and the end result on the distribution of the funds may not always be what the person had intended.
A common misunderstanding amongst clients is that they think a valid Will determines who receives their super death benefits. A Will unfortunately cannot determine who your Super is paid out to. A BDBN is the safest way to ensure your death benefits end up with the right person.
The pain of having no Binding Nomination – a real client story
One in five Australian families will experience unexpected death, accident or illness of a parent*. John Day’s family was one of them. The story that follows describes the pain John’s loved ones went through when he passed away without a valid BDBN.
John was happily married to Jane with a very young daughter. He also had 2 other estranged children under 18 years old from two previous relationships that he had no intention of leaving anything to.
Although his death was expected due to an ongoing illness, he thought he had everything in order by updating his Will in favour of his current wife and also nominating her as a Non-Binding beneficiary in his super. Sadly his Industry Super fund did not have the ability to make a Binding Nomination.
When John passed away, it was heart breaking to witness the emotional stress on his current family not only for the loss of losing a father and a husband but also because he died without making a BDBN leading to pain both emotionally and financially in having to fight with other beneficiary contestants when in fact John had intended to leave to his super and insurance to his current wife and child.
Jane was now facing life without her husband and also facing the fact that his limited superannuation and life insurance proceeds would have to be split amongst the other dependents.
What you can do to avoid this
– Request a death benefit binding nomination form from your superannuation fund.
– List your beneficiaries (spouse, children, executor of will)
– Sign it and have witnesses present.
– Return the form.
If your fund does not provide the ability to make a Binding Death Benefit Nomination then seek assistance through a financial planner immediately.
*Source: Lifewise/NATSEM 2010
