Binding Death Benefit Nominations Subject to Challenge

In yet another fetter on a person’s ability to direct where their assets will go after their death, the Uniform Succession Act provisions, agreed to by all States and recently passed in NSW in the Succession Bill, will give the Court the power to rule that a person’s Binding Death Benefit Nomination should not be followed or should be amended.

If a super fund member had executed their Binding Death Benefit Nomination within three years of their death, the Court has the power to rule that the superannuation benefits -  the subject of that nomination - are part of what the legislation calls the deceased’s “notional estate”.  The Court then has wide powers to order how that notional estate is to be dealt with – ie to whom it is to be paid – regardless of what the deceased member wanted.

The Court’s power is limited to making these orders where there is a family provision claim.  Those claims will only be able to be made by:

• the deceased’s spouse (formal or de facto)
• the deceased’s former spouse (formal or de facto)
• the deceased’s child (more broadly defined than just their natural child)
• the deceased’s grandchild who is or was financially dependent on the deceased and who is or was living with the deceased at some time
• a person living in a close personal relationship with the deceased at the time of death.

All the more reason for anyone wanting to have a Binding Death Benefit Nomination put in place to act as early as possible to get past the three-year rule and ensure the Nomination is more likely to be effective.  The new provisions come into force on 1 July 2009.