Binding Death Benefit Nomination (BDBN) or a Non-Binding Death Benefit Nomination (Non-BDBN) – that is the question!
When you pass away, a vast majority of your assets are distributed via your Will. Your superannuation is not one such asset. Upon your passing, the Trustee of your superannuation fund will distribute your superannuation monies in accordance with the superfund’s Trust Deed.
You usually have the option of informing the Trustee of your preferences in relation to the distribution of your funds by completing a valid Binding Death Benefit Nomination (BDBN) or a Non-Binding Death Benefit Nomination (Non-BDBN).
How are BDBNs & Non-BDBNs different?
A valid BDBN compels the Trustee of the superfund to distribute your superannuation death benefits in line with your wishes. A valid Non-BDBN on the other hand, provides the trustees with a ‘wish list’ on how your superannuation death benefits are distributed. The ultimate decision on how the funds are distributed are left with the Trustee.
Who should I give my superannuation to?
There can be tax implications to beneficiaries when they receive your superannuation benefits. Superannuation death benefits will be taxed depending on whether the recipient is a ‘dependant’ for tax law purposes.
Your tax dependants include:
- current & former spouses or defactos
- children under the age of 18
- other financial dependants
Paying superannuation death benefits to non-dependents will have the following tax implications:
- the taxable component of the benefit payment is taxed at 15% (plus 2% Medicare levy)
- insurance payout from superannuation can be taxed at 30% (plus 2% Medicare levy)
- the tax-free benefit component will not attract tax
You can choose specific beneficiaries in your BDBN and Non-BDBN. Alternatively, you could have your benefits paid to your estate. If you do this, the proceeds from your superannuation account will be paid out to your beneficiaries in accordance with your Will.
Other points to consider for your superannuation after passing
On your BDBN and Non-BDBN, you can choose to give your beneficiaries specific dollar amounts or a percentage of your superannuation death benefit.
Once your BDBNs/Non-BDBNs are in place, we recommend that you review them every three years to ensure that they remain in line with your current circumstances and testamentary wishes.