With some funds moving partly into accumulation phase on 30 June, SMSFs have been told to check that their binding death benefit nomination covers the accumulation component of their fund.
SuperConcepts executive manager of SMSF technical and private wealth Graeme Colley says SMSF practitioners and their clients need to look carefully at any binding death nomination to ensure that it not only covers pensions, but the accumulation phase as well.
“I’ve seen binding death benefit nominations that only cover the pension account in the fund because the person thought they were going to continue to draw pensions forever so they just mentioned the pensions,” Mr Colley said.
With some SMSF trustees now moving money into accumulation phase, however, they need to think about the binding death benefit nomination because it may catch them out if money has gone over to accumulation phase.
If it isn’t covered in the BDBN, it will depend on what the trust deed says, Mr Colley said.
“In most cases, the trustees after the death of the individual would look after the distribution of that amount, so it really comes back to the trust deed and what the instructions of the deed say,” he said.
“That’s probably a little bit of a trap there. People are probably not thinking as wide as they could.”
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