A person is a dependant of a deceased member if, at the time of death, that person was:

• The deceased’s spouse or de facto spouse;
• A child of the deceased;
• Financially dependent on the deceased; or
• In an interdependency relationship with the deceased.

A BDBN is a useful tool, as in directing the trustee of a superannuation fund to pay out your member balance in accordance with your directions upon your death, it can prevent the remaining trustee(s) from exercising their discretion to distribute your member balance to individuals outside those you intended the member balance to be paid to.

A superannuation fund’s member balance is not subject to the terms of will. However as discussed above, a BDBN can direct the trustee of a superannuation fund to pay out the member balance to the deceased’s estate (LPR), thereby allowing the funds representing the deceased’s member balance to be subject to the terms of the deceased’s will.

Where a member of a superannuation fund decides to prepare a BDBN, care needs to be taken as to where the funds are directed to be paid, as the payment of the member balance may be subject to tax in the hands of the recipient(s).

Recent case law has indicated that care needs to be taken when preparing a BDBN to ensure that it remains effective.

The following is a list of common issues that may affect the validity of a BDBN:

• Whether the trust deed allows a BDBN to be made;
• Whether the trust deed allows lapsing and/or non-lapsing BDBN’s;
• In the case of a lapsing BDBN, that the BDBN is still current or that it has sufficient time left that the trustee cannot hold off making the death benefit payment until the BDBN has lapsed;
• Whether the BDBN is made in the appropriate form according to the trust deed and legislation;
• Where a BDBN is made under powers granted under a varied trust deed, the trust deed needs to be appropriately executed at the time the BDBN is made to ensure that the BDBN is valid;
• Where the death benefit is to be paid to the estate the term ‘legal personal representative’ needs to be used, as any other term is not considered valid;
• Where both a reversionary pension and a BDBN are in place, there is some uncertainty as to which takes preference. The general consensus is that outside of the trust deed giving priority over either the reversionary pension or the BDBN, the reversionary pension would likely take precedence; and
• Certain wording may invalidate the BDBN, such as giving the trustee discretion in following the BDBN or a lack of clarity in the wording of the BDBN could leave it open to misinterpretation.