What if a member passes away? Superannuation issues you need to check
When faced with the death of a superannuation member, there are many things you need to check – issues concerning binding death benefit nominations.
Consider the following:
- Some trust deeds require a binding nomination to be in an approved form. The form can be annexed to the deed. Check that the form completed by the client is consistent with the terms of the deed.
- Not that if the approved form is not used it will not be binding on the trustee.
- Check the terms of the form with the terms of the deed.
- If the form is not acceptable, amend the trust deed not the form.
- Some deeds will require in the deed terms that the binding nomination be in a form approved by the trustee.
- If the trust deed does not include a default or preapproved form, then the trustee has to decide what is the approved form.
- This means the trustee must take an active step to approve a form before a nomination is binding on the trustee.
- The trustee must be in a position to produce evidence that the form was approved. This will require a resolution minuted in accordance with the terms of the deed.
- Check that the person the client wants to nominate as a beneficiary is an eligible recipient for the purpose of the SIS regulations or that they are an eligible recipient for the purposes of the SIS regulation but the trust deed provisions may be inexplicably narrow – check what the trust deed says about who can be nominated as a beneficiary.
- Check if the binding nomination executed or to be executed by the client is in favour of a de facto spouse. Sometimes a trust deed defines a spouse as a legally married wife only.
- The definition of spouse needs to be read carefully.
- In some trust deeds a binding nomination can only be made to a dependant and not to the estate.
- How is member defined and does the deed say that a member is able to make a binding nomination. For example the definition of member may not include a person whose only interest in the fund is their pension account.
- Does the trust deed require a trustee acknowledgement? If so there must be evidence of the acknowledgement.
- Does the trust deed require the trustee to provide information to the member before the trustee can accept a binding nomination?
- Does the trust deed provide that a nomination must comply with the terms of the SIS Act, or SIS Regulations? Note that the SIS Act, and SIS Regulations do not apply to binding nominations in self-managed super funds. If that is the case, it is arguable that the trustee of the self-managed super fund will not be bound by the nomination where the trust deed requires the binding nomination to comply with or be binding under the terms of the SIS Act, or SIS Regulations.
- The alternative is to have a clause that does not require compliance with the SIS Act, or SIS Regulations but merely imports the technical requirement set out in those provisions into the trust deed.