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Superannuation
Superannuation (SMSF) document

SMSF Death Benefit Nomination

Use Cleardocs to create, replace or confirm an SMSF member's death benefit arrangements, through:

  • death benefit nominations (binding or non-binding); or
  • death benefit agreements.
$77.00
  • Cleardocs fee incl GST $77.00
Product Benefits
  • Option to nominate a reversionary beneficiary (only for binding Death Benefit Nominations)
  • Free letter available for you to explain the document package to your clients
  • No extra cost if ordered on SMSF set up.
  • Includes copy function for address details - saving you typing
  • Extensive online help and local phone support
  • Easy to use question interface
Product Information

What documents are included in the Cleardocs package?

The Cleardocs package includes:

  • the single Death Benefit Nomination Form you need to create, replace or confirm the members' death benefit arrangements; and
  • an Establishment Kit explaining what to do next.

The Cleardocs interface lets you set, on a member-by-member-basis, whether that member's nomination is binding or non-binding.

What information do you need to order a Death Benefit Nomination through Cleardocs?

Our checklist sets out the information required to order a Death Benefit Nomination.

Are Death Benefit Nominations binding?

The law, and the Cleardocs SMSF Deed, allow a member to set whether their Death Benefit Nomination is to bind the other trustees (or the other directors) or merely to guide them. If a member's Death Benefit Nomination:

Some people use a binding Death Benefit Nomination in situations where the member thinks that the other trustees (or other directors) might distribute the money in a manner that is not consistent with the member's wishes. In some families, this is a likely scenario. They need to consider:

  • keeping the binding Death Benefit Nomination up to date because it lasts for only 3 years from the date it was signed or last confirmed; or
  • arranging a Death Benefit Agreement which is binding, and permanent until the member revokes it or replaces it.

The difference between Death Benefit Nominations and Death Benefit Agreements

The key differences between Death Benefit Nominations and Agreements are shown in this table:

Option Binding or non-binding Expiring or "permanent"
Death Benefit Nomination Member chooses

A non-binding nomination lasts until revoked or replaced

A binding nomination expires by law after 3 years. (There is some controversy about this point. You can read an article here by our lawyers at Maddocks about why they believe the three year limit applies.)

Death Benefit Agreement Always binding Always permanent until the member revokes or replaces the Agreement

Why are Death Benefit Nominations and Agreements useful?

A member of a Self-Managed Superannuation Fund can use a Death Benefit Nomination or a Death Benefit Agreement to arrange who is to receive any amount payable under the fund when the member dies.

If there is no nomination or agreement, then normally the other trustees (or other directors) can distribute the relevant money at their complete discretion (in any way that is allowed under the fund's deed and superannuation law)" potentially, even to themselves.

How often should members consider creating, replacing or renewing their death benefit arrangements?

Creating: Members should consider making a new arrangement whenever their situation, or their dependant's situation, changes in a way that affects how the member would like their superannuation benefit to be distributed after they die. The member should consider this whether the member has an Agreement or a Nomination, binding or non-binding.

Replacing or confirming: Members with binding nominations that still reflect the member's wishes should consider confirming their nominations at least every 3 years" this is because of the 3 years limit discussed under the previous heading.

When are the Cleardocs death benefit arrangement documents useful?

The Cleardocs documents for SMSF death benefit arrangements are useful:

  • for any old funds for which the members have not completed death benefit arrangements;
  • for members who want to put in place a binding agreement that will not expire unless the member wants to make a change; and
  • for any members for which existing arrangements may be either out of date or expired. Remember, the law says that after 3 years, a binding death benefit nomination expires if it is not confirmed. After it expires, the other trustees (or other directors of the trustee company) are free to distribute the relevant money any way they like (that is allowed under the fund's deed and superannuation law)" potentially, even to themselves.

FREE marketing letter

To help you explain to your clients the need for them to consider creating, replacing or confirming the members' death benefit arrangements, you can use the Cleardocs draft marketing letter. The summary in that draft letter is for information purposes only. We are not allowed to give advice. Also, because we do not know the member's or the fund's situation, we can give only information, not advice.

Cleardocs Deed required for Death Benefit Agreements

To create a new Death Benefit Agreement, the fund needs to have a Cleardocs deed that was created or updated on or after 4 May 2009. If the fund currently:

  • has a Cleardocs deed, you can check which version it has by logging in at Cleardocs and clicking the light blue "Version X of Y" button beside the relevant SMSF in your list of documents; or
  • does not have a Cleardocs deed., then you can update it to a Cleardocs deed

(For any SMSF set up through Cleardocs, you receive Death Benefit Nominations or Agreements with the original package of documents you create.)

Seek legal advice

The Death Benefit arrangements information here should be considered general in nature, and in no way interpreted as legal advice. You must always seek your own independent legal, accounting and financial advice about your particular situation. The summary on this page is for information purposes only.

Frequently Asked Legal Questions

Cleardocs is not a law firm. So as with all the legal material on this site, the answers to these "frequently asked legal questions" are provided by the law firm Maddocks. Cleardocs does not endorse those answers.

Expand All

If a self managed superannuation fund (SMSF) member dies and they have a reversionary pension and a death benefit agreement or nomination, which takes priority?

Overview

This answer for this FALQ sets out what happens for an SMSF member — using Cleardocs documents — who dies with both of the following in place:

  • a pension that names a reversionary beneficiary; and
  • a death benefit arrangement — it can be either a Death Benefit Nomination (binding or non-binding) or a Death Benefit Agreement. (See the end of this article for an explanation of the difference.)

To determine which of the arrangements takes priority, you must follow the terms of the relevant documents. The documents could include one or more of the following:

  • a SMSF deed;
  • a Death Benefit Notice;
  • a Death Benefit Agreement; or
  • a Pension Payment Agreement.

Further, all of these documents should be considered alongside the member's will so that you have the full picture: this is because a death benefit arrangement may direct the trustee to pay super benefits into the deceased's estate and those benefits will then be dealt with in accordance with the terms of the will.

To confirm the position for a particular member, you should seek legal advice.

The general position

If Cleardocs documents are in place, then generally the following arrangements apply.

If the Member has a Pension Payment Agreement that names a reversionary beneficiary, then after the member dies, the trustee must pay the pension to the reversionary beneficiary named in the schedule of the Pension Payment Agreement. So if the reversionary beneficiary is a pension dependant, then any Death Benefit Notice or Death Benefit Agreement has no effect in relation to that pension.

However, the following factors also need to be considered (and are dealt with below):

  • at the time of the member's death, the reversionary beneficiary must be a "pension dependant" (explained below) of that member;
  • what happens when the reversionary beneficiary dies;
  • there may be no reversionary beneficiary named in the Pension Payment Agreement; and
  • superannuation benefits other than those funding payment of the pension

What is the meaning of a "pension dependant"?

The meaning of a "pension dependant" is best understood by first considering the meaning of "dependant" and then adding the meaning of "pension dependant". Here goes.

To be classified as 'dependant' under section 10 of the Superannuation Industry (Supervision) Act 1993 (SISA), the person must be in a 'interdependency relationship' with the member or be the member's spouse or child. Two people, whether related or not, are treated as being in an 'interdependency relationship' if:

  • they have a close personal relationship; and
  • they live together; and
  • one or each of them provides the other with financial support; and
  • one or each of them provides the other with domestic support and personal care.

To be classified as a 'pension dependant' and as a result be entitled to receive a pension on the death of a member, you must not only be a 'dependant' but also, in the case of a 'dependant' who is a child of the deceased, be:

  • less than 18 years of age; or
  • be 18 or more years of age and less than 25 years of ageand be financially dependant on the member; or
  • have a disability of the kind described in subsection 8(1) of the Disability Services Act 1986.

What if the reversionary beneficiary is not a "pension dependant"?

If at the time of the member's death, the reversionary beneficiary is not a "pension dependant" (explained above) of that member and the member has a valid Death Benefit Notice or Death Benefit Agreement, then the trustee must follow the instructions in that Notice or Agreement.

If the member does not have a valid Death Benefit Notice or Death Benefit Agreement, then the trustee must deal with the member's account in accordance with the SMSF deed and superannuation law. Generally, under the Cleardocs documents, this would require the trustee to pay or apply the relevant benefits in the way the trustee thinks fit, in accordance with the following rules:

  • If the member or beneficiary has left dependants , then the trustee must pay or apply the benefit to or for the benefit of any one or more of the dependants of the member or beneficiary and the legal personal representatives of the member or beneficiary.  The trustee may do so in any proportions the trustee thinks fit and may take into account a member's wishes contained in a non-binding nomination form.
  • If the member or beneficiary has not left any dependants but does have a legal personal representative, then the trustee must pay the benefit to the legal personal representatives of the member or beneficiary.
  • If the member or beneficiary has not left any dependants and has no legal personal representative, then the trustee may pay or apply the benefit to or for the benefit of any individual at the trustee's discretion. The trustee may do so in any proportions the trustee thinks fit.
  • If the trustee has not paid or applied the benefit to or for the benefit of any person described above, then the trustee must treat the benefit as a forfeited benefit entitlement.

What happens when the reversionary beneficiary dies?

If permitted by the trustee, the reversionary beneficiary may — once they have started receiving the pension — give the SMSF trustee(s) a written Death Benefit Notice specifying which of the beneficiary's dependants is to receive their account balance on their death. The Death Benefit Notice must be in accordance with superannuation law. If the reversionary beneficiary has done that, then the trustee must pay the account balance in accordance with the reversionary beneficiary's Death Benefit Notice.

If the reversionary beneficiary does not have a Death Benefit Notice, then the reversionary beneficiary's account is dealt with in accordance with the SMSF deed and superannuation law. Generally, under the Cleardocs documents, this would require the trustee to pay or apply the relevant benefits in the way the trustee thinks fit, in accordance with the following rules:

  • If the member or beneficiary has left dependants, then the trustee must pay or apply the benefit to or for the benefit of any one or more of the dependants of the member or beneficiary and the legal personal representatives of the member or beneficiary. The trustee may do so in any proportions the trustee thinks fit and may take into account a member's wishes contained in a non-binding nomination form.
  • If the member or beneficiary has not left any dependants but does have a legal personal representative, then the trustee must pay the benefit to the legal personal representatives of the member or beneficiary.
  • If the member or beneficiary has not left any dependantsand has no legal personal representative, then the trustee may pay or apply the benefit to or for the benefit of any individual at the trustee's discretion. The trustee may do so in any proportions the trustee thinks fit.
  • If the trustee has not paid or applied the benefit to or for the benefit of any person described above, then the trustee must treat the benefit as a forfeited benefit entitlement.

What if no reversionary beneficiary is named in the Pension Payment Agreement?

If a reversionary beneficiary is not named in the pension document and the member has a valid Death Benefit Notice or Death Benefit Agreement, then the trustee must follow the instructions in that Notice or Agreement.

What if the member has both a Death Benefit Agreement and a binding Death Benefit Nomination?

In these circumstances the Death Benefit Agreement prevails over any binding Death Benefit Notice (and any Non-binding Nomination Form). This means that the trustee must pay, or apply, the relevant benefit in accordance with the rules set out in the Death Benefit Agreement.

What if there are other superannuation benefits?

Don't forget that this FALQ deals only with what happens to a pension being paid to the member/beneficiary.

The member may also have other super benefits still in accumulation phase. Any death benefit arrangement will still be relevant to these benefits (even if they're not relevant to the pension).

How are pension payments to children to be treated?

If the pension is paid to a child of the member or of the later reversionary beneficiary, then the pension must be cashed to a lump sum — unless on the day it is to be cashed, the reversionary beneficiary has a disability of the kind described in section 8(1) of the Disability Services Act 1986.

What is the difference between a Death Benefit Notice and a Death Benefit Agreement?

The difference between a Death Benefit Notice and a Death Benefit Agreement is explained in this table:

Option Binding or non-binding Expiring or "permanent"
Death Benefit Nomination Member chooses

A non-binding Nomination last until revoked or replaced

A binding nomination expires by law after 3 years. (There is some controversy about this point. You can read an article here by our lawyers at Maddocks about why they believe the three year limit applies.)

Death Benefit Agreement Always binding Always permanent until the member revokes or replaces the Agreement

You can read about the Cleardocs

What happens if a beneficiary named in a member's death benefit agreement, or binding death benefit nomination, dies?

The Cleardocs interface for these products allows the customer the following choices to cater for a beneficiary or beneficiaries dying before the member:

  • If the document names more than one beneficiary, then the deceased beneficiary's portion of the death benefit can be either:
    • distributed to the remaining beneficiaries in equal proportions;
    • distributed to the member's legal personal representative (to be dealt with as part of the member's estate); or
    • paid in accordance with the fund's trust deed and superannuation law, which will confer a discretion on the trustee.
  • If the document names more than one beneficiary and all beneficiaries die before the member, then the member's death benefit can be either:
    • distributed to the member's legal personal representative (to be dealt with as part of the member's estate); or
    • paid in accordance with the fund's trust deed and superannuation law, which will confer a discretion on the trustee.
  • If the document names only one beneficiary, then the deceased beneficiary's portion of the death benefit can be either:
    • distributed to the member's legal personal representative (to be dealt with as part of the member's estate); or
    • paid in accordance with the fund's trust deed and superannuation law, which will confer a discretion on the trustee.

Can a minor SMSF member enter into a death benefit agreement or nomination?

Cleardocs Death Benefit Agreements and Death Benefit Nominations are only suitable for adult SMSF members. They are not suitable for minor SMSF members younger than 18 years.

While superannuation law does not prevent minor SMSF members from entering into death benefit agreements or nominations, any agreement or nomination by an SMSF member younger than 18 years is not binding, because the member is a "minor".

If you wish to arrange for a minor SMSF member to enter into a death benefit agreement or nomination, you should obtain legal advice about the effectiveness of these arrangements. To discuss the member's options, please call us on 1300 307 353 and we will arrange for you to speak with the relevant lawyer at Maddocks, for free.

Can I use Cleardocs death benefit documents to nominate more than 1 reversionary beneficiary?

The Cleardocs death benefit nomination and death benefit agreement document packages only allow nomination of 1 reversionary beneficiary with that person to receive 100% of the member's pension.

Under the law, if a member has a number of possible pension dependants, they are permitted to make death benefit arrangements specifying more than 1 reversionary beneficiary and the proportion of the benefit each beneficiary is to receive. However this gives rise to a range of complexities and you must seek your own advice about it. You are welcome to use our lawyers at Maddocks for obtaining this advice — they will charge for their time as this is not part of the free legal helpline we arrange through Maddocks.


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