Dangers of DIY Death Planning

Why SMSF Wills outperform Binding Death Benefit Nominations (BDBN).

Many trustees of self-managed super funds (SMSFs) operate under a dangerous assumption: that a Binding Death Benefit Nomination (BDBN) is enough to ensure their superannuation goes to the right people. Unfortunately, this is often not the case, and the consequences for families can be devastating.

Why Most BDBNs Don’t Work in SMSFs

BDBNs were designed for large retail and industry funds. But within SMSFs, their

effectiveness is limited unless the fund’s deed specifically authorises them and sets clear

binding rules. Here are the three main issues:

• Expiry: Most BDBNs expire after 3 years under Regulation 6.17A of the SIS

  Regulations, unless the trust deed overrides this

• Invalid Drafting: Many nominations are drafted without legal review and don’t match

  the language or power structure of the deed

• Control: Even if valid, a BDBN can be overridden or ignored if the wrong person

  controls the fund at death.

  
  

Case Study: The Dawson SMSF

Ken Dawson built a successful SMSF valued at $6.8M, primarily comprising farmland and

cash. His BDBN left everything to his second wife. However, his adult children from his first

marriage contested the nomination, alleging that the benefit breached Regulation 6.22, which prohibits payment to someone not classified as a dependent.

The matter went to the Supreme Court. After 18 months and $280,000 in legal costs, the

court ruled the BDBN invalid due to deed misalignment and regulatory breach. The estate

was redistributed, but the family relationships were irreparably damaged.

The Superior Alternative: SMSF Wills

An SMSF Will is a deed-integrated document that outlines precise instructions for the benefit

distribution upon death. Unlike a BDBN, it is:

• Embedded in the SMSF’s governing rules

• Harder to challenge

• Controlled only by those who hold trustee and director power

When paired with a Leading Member structure, SMSF Wills ensure that decision-making is

retained within the bloodline, preventing disputes and ensuring seamless transitions.

What You Should Do

• Review Your Deed: Ensure it permits binding nominations or SMSF Wills

• Upgrade to a Leading Member SMSF: Limit succession and trustee rights to

  selected family members

• Establish an SMSF Will: Crafted to work with your deed and estate plan, including specific instructions for benefit distribution.

Checklist

• Is your BDBN valid, current, and aligned with your deed?

• Who controls your SMSF at death, and do they reflect your wishes?

• Have you included super benefits in your overall estate plan?

Superannuation is not governed by your Will unless structured accordingly. If your SMSF holds significant value, particularly farmland or business premises, you owe it to your family to ensure these assets are protected and directed appropriately.

If you would like assistance in developing a comprehensive succession plan tailored to your family's needs, please get in touch.

Book a meeting

Nijo Antony

Director