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Self Managed Super Funds and Binding Death Benefit Directions

A recent landmark decision of the High Court Hill v Zuda Pty Ltd [2022] HCA21 confirms that BDBNs made for an SMSF do not lapse (essentially rules that require BDBNs to be renewed every three years and otherwise to comply with will like execution requirements such as two witnesses etc (SISR 6.17A) do not apply to SMSFs. )

What occured in Hill V Zuda Pty Ltd was that words that purported to be a BDBN were inserted in an SMSF Trust Deed and it was argued (unsuccessfully) that SISR 6.17A had not been complied with.


To avoid years of litigation (and a day in the High Court) not to mention the attendant cost, unless you generously want to contribute to the learning and development of Superannuation Law in Australia, Hill v Zuda Pty Ltd is a timely reminder:

 (a) about the need to make sure that SMSF Trust Deeds do not unwittingly (by poor drafting) adopt the SISR 6.17A (when they do not have to);

 (b) that BDBNs should only be prepared and signed after thorough consideration of the Trust Deed (and a client’s particular circumstances);

 (c) that BDBNs, Reversionary Pension documentation and Trust Deeds should be reviewed regularly (sometimes inconsistent documents are put in place by different advisers);

 (d) about the need to review the chain of all trust deed documents (to ensure that the most current deed is actually binding on all parties).


If your financial planner or accountant prepared or arranged for any documentation to be signed by you it is even more important to have these documents reviewed (or indeed) done again by a qualified legal practitioner with relevant experience. 


More often than not ‘off the shelf' products are downloaded from the internet and signed without reference to your other estate planning documents, your SMSF trust deed and pension documentation and, regrettably, the law. 


If a non-qualified person or entity prepares a BDBN for you they will (in all likelihood) not be insured if they are found to have been negligent which means you may never be compensated for your losses.  Their insurer will rely on Section 10 of the Legal Profession Uniform Law which prohibits unqualified entities from engaging in legal practice (to avoid indemnifying them under their professional indemnity insurance policy – don’t you love insurers).   Those found to be breaking the prohibition have committed an offence that carries a maximum penalty of a $27,500 fine and/or 2 years imprisonment.