The proceeds of your Self Managed Superannuation Fund (SMSF) and Family Trust do not form part of your estate. They are held by the trustees of the fund on behalf of the beneficiaries, in the case of the SMSF the members of the fund, generally you.
That said, depending on the terms of the SMSF deed your significant wealth contained in that fund is not governed by the terms of your Will. If you do not have them in place already and your SMSF deed allows them, then, you should ensure that Binding Non-Lapsing Death Nominations are put in place in respect of your SMSF.
Not having a Nomination at all or having a Non-Binding Nomination could lead to a situation which was decided by the New South Wales Supreme Court in 2005.
In that decision the deceased left a Non-Binding Death Benefit Nomination indicating that he wished for his SMSF to be divided equally between both of his children.
Unfortunately for the deceased’s son, his daughter had completed an application for admission as a member of the SMSF which was accepted and she was appointed as a member of the fund. Upon the deceased’s death the daughter, in compliance with the relevant legislation appointed her husband as an additional trustee of the SMSF.
The trustees then, as allowed by the SMSF deed refused to follow the deceased’s Non-Binding Death Benefit Nomination which was a nomination that the benefits of the Funds of approximately $1,000,000.00 be paid equally between the deceased’s children. Instead the deceased’s daughter paid the entire benefit to herself, again in compliance with the terms of the SMSF deed.
The aggrieved son then brought an application to have the decision set aside. That challenge was, however, unsuccessful because the nomination was non-binding, the trustee daughter had been validly admitted as a member of the SMSF and was able to exercise her discretion in the manner in which she had.
To add insult to injury because the superannuation benefits came from a SMSF the aggrieved beneficiary did not have recourse to the Superannuation Complaints Tribunal because that Tribunal, which may have been able to make an Order in the aggrieved beneficiary’s favour, does not have jurisdiction over SMSFs. The above is an illustration of what can go wrong when Binding Death Benefit Nominations are not made.
Contact us to discuss a review of your SMSF Deed to see if you can put a Binding Nomination in place and to review your estate planning by phoning 1800 000 993 or email us firstname.lastname@example.org
The information contained in this report is merely a guide and is not meant to be a detailed explanation of the law relating to this subject. We recommend that you see us about any particular legal problem.
 Katz –v- Grossman  NSW SC 934