Rowena Thiele Advisors - Business Advisory Firm, Bayside Melbourne

SMSF estate planning and death benefit nominations

One misconception many people have is that their normal "last will and testament" can be relied upon to distribute their estate, including money tied up in their SMSF.  But the payment of such benefits upon the death of a member is done so in accordance to the governing rules of the fund, not according to the terms of the will.

This is why it is important for every member of an SMSF to direct how benefits are to be paid upon their death - and the death benefit nomination is the vehicle to make sure this is done.

A death benefit nomination is a written direction to the SMSF trustee that instructs the trustee to pay a member's entitlements to certain dependants and/or legal personal representatives (their estate) in the proportions the member wishes in the event of their death.

A binding death benefit nomination leaves no discretion to the trustee. Benefits must be paid out in strict accordance to the nomination, which can be used to ensure no disputes arise between feuding relatives, or to exclude wayward children or estranged children's spouses.