SMSF Death Benefits Guide
A practical guide to what happens to super when an SMSF member dies. Covers binding death benefit nominations, reversionary pensions, who can receive a death benefit, how SMSF death benefits are taxed, the role of the trust deed, and the steps trustees must take after a member passes away.
Key facts at a glance
About this guide: Super Informed maintains this page as general information for Australian SMSF trustees. It is reviewed each financial year and updated when ATO, ASIC, or superannuation guidance changes. It does not replace advice from a licensed financial adviser, SMSF specialist, registered tax agent, or solicitor.
Why do SMSF death benefits need planning?
SMSF death benefits do not automatically follow a will. They are paid under superannuation law, the fund trust deed, and any valid binding death benefit nomination or reversionary pension nomination.
Estate planning in an SMSF is a control issue. Death benefit rules interact with the deed, super law, tax law, family law, and estate law at the same time. A valid BDBN or reversionary pension gives certainty. Without one, the remaining trustees exercise discretion - which may not match the deceased member's wishes.
Why is super not an estate asset?
The balance of an SMSF member's account is not automatically distributed according to their will. Super is held in trust for the member under the SIS Act and the fund's trust deed. On death, it must be paid according to superannuation law - not estate law.
- A will that says "I leave everything to my children" does not direct the SMSF benefit
- The super balance may go to a different person than the rest of the estate if no valid nomination is in place
- The SIS Act restricts who can receive a death benefit directly from the fund - not all family members are eligible
Why do SMSFs require more active planning?
In a retail or industry fund, a large institution makes the decision on who receives the death benefit. In an SMSF, the trustee is typically the member themselves or a company they control. On death:
- The remaining trustees make the decision about how to pay the benefit
- If there is only one member and no corporate trustee, there may be no trustee left to act
- If there is a corporate trustee, the company continues but its directors may need to be updated
- Family conflict over super entitlements is more likely in an SMSF because the amounts are larger and the trustee relationships are personal
What are the three ways to direct a death benefit?
- Binding death benefit nomination (BDBN): A formal written direction to the trustee that is legally binding if validly made and current. The trustee must pay the benefit to the nominated person in the nominated proportions. Covered in Section 03.
- Reversionary pension nomination: Made at the time a pension commences. Directs the pension to automatically continue to a nominated dependant on the member's death. Covered in Section 05.
- Trust deed provisions: Where no valid BDBN or reversionary nomination exists, the trust deed governs who the trustee may pay and in what circumstances. The trustee then exercises discretion within the trust deed's rules.
Without a valid nomination, the trustee of the fund - which may include the surviving spouse or other family members - has discretion to decide who receives the death benefit. This discretion has been contested in court. In some cases the benefit has gone to a person the deceased would not have chosen. The only way to direct the benefit with legal certainty is a valid and current binding nomination or a reversionary pension nomination.
Who can receive a death benefit?
An SMSF death benefit can generally be paid to a spouse, child, financial dependant, interdependency relation, or the deceased member's legal personal representative. The recipient's legal status determines whether they can receive a lump sum, a pension, or only payment via the estate.
Who is an eligible dependant under superannuation law?
Under the SIS Act and SIS Regulations, a death benefit can be paid directly from the fund to:
- Spouse or former spouse: Includes de facto partners. Same-sex spouses and de facto partners are treated the same as married spouses under superannuation law.
- Child of the deceased: Includes biological, adopted, and stepchildren. Also includes children born after the member's death.
- Any person in an interdependency relationship with the deceased: Two people are in an interdependency relationship if they lived together, had a close personal relationship, and one or both provided financial support, domestic support, or personal care to the other.
- Any person who was financially dependent on the deceased at the time of death.
- The legal personal representative (estate): The executor or administrator of the deceased's estate. This allows super to flow into the estate and be distributed via the will, but it does not mean super automatically flows to the estate.
Who cannot receive a death benefit income stream?
Adult children who were financially independent of the deceased at the time of death are not eligible to receive an ongoing death benefit income stream (pension) from the fund. They can only receive a lump sum.
This is one of the most common misconceptions in SMSF estate planning. A member who wants their adult financially independent children to continue receiving super as an ongoing income stream cannot achieve this within the SMSF framework.
Why do SIS dependants and tax dependants differ?
There are two different definitions of "dependant" that apply here, and they govern different things:
- SIS dependant (super law): Determines who can receive the death benefit directly from the fund. This is the broader definition - it includes financial dependants and interdependency relationships.
- Tax dependant (tax law): Determines whether the benefit is received tax-free. This definition is narrower. Spouses and children under 18 are always tax dependants. Financially independent adult children are not.
The same person may be a SIS dependant (eligible to receive) but not a tax dependant (their share will be taxed).
Adult child receives a lump sum, not a pension
Helen dies with a $900,000 SMSF balance and nominates her adult son Mark. Mark is 38, financially independent, and was not in an interdependency relationship with Helen.
The beneficiary is eligible to receive the benefit, but the form and tax outcome are different from a spouse or minor child.
A common estate planning goal is leaving super to adult children. The fund can pay adult children directly, but financially independent adult children generally receive a lump sum only and the taxable component is usually taxed. Members who want to minimise the tax impact on adult children should understand the tax-free vs taxable component split in their super balance.
How does a binding death benefit nomination work?
A binding death benefit nomination (BDBN) is a formal written direction that tells the SMSF trustee who must receive the death benefit and in what proportions. If it is valid under the deed and super law, the trustee is legally bound to follow it.
What makes a BDBN valid?
For a BDBN to be legally binding under superannuation law, it must:
- Be in writing
- Be signed and dated by the member in the presence of two witnesses, both of whom are over 18 and are not named in the nomination
- Nominate eligible beneficiaries only (SIS dependants or the legal personal representative)
- State the proportions to be paid to each nominated person, totalling 100%
- Be submitted to the fund
A BDBN that does not meet these formal requirements is not binding. The trustee may still use it as guidance in exercising discretion, but is not legally required to follow it.
Does a BDBN lapse?
By default, most SMSF trust deeds apply a 3-year lapsing period (imported from SIS Regulations). A BDBN made in 2022 and not renewed would have lapsed by 2025, leaving no binding direction in place.
Some trust deeds explicitly allow non-lapsing BDBNs. A non-lapsing BDBN remains in force until it is revoked or replaced. Not all SMSF trust deeds permit non-lapsing BDBNs - silence or default under the deed means the BDBN lapses. The deed must specifically allow them.
Every member with a BDBN in place should know whether it lapses (and when) or is non-lapsing. Allowing a lapsing BDBN to expire without renewal is one of the most common and consequential estate planning failures in SMSFs.
Should a BDBN nominate the estate?
A member can nominate their legal personal representative (LPR) as the beneficiary. This directs the entire death benefit into the estate, where it is distributed according to the will.
Reasons to consider this:
- To distribute super among people who are not SIS dependants
- To have a single document (the will) govern all assets including super
- Complex family situations where the will includes specific conditions
The downside: directing super to the estate may expose it to estate challenges, creditor claims, and probate delays. Paying directly to nominated dependants bypasses these risks.
Can a BDBN be changed?
A member can revoke or replace a BDBN at any time while they have legal capacity. Written notice to the fund is required. A new BDBN supersedes any prior BDBN for the amounts it covers.
If a member loses mental capacity, they generally cannot make, change, or revoke a BDBN. The timing of setting up and reviewing nominations is therefore important, particularly for older members or those with deteriorating health.
Illiquid assets can make payment difficult
David's SMSF has a $1.4M commercial property, $120,000 cash, and a BDBN directing his $700,000 death benefit to his adult daughter as a lump sum.
If the fund cannot pay from cash, trustees may need to sell assets or use an in-specie payment if the deed permits it and the transfer is properly valued.
A BDBN that lapses without renewal is not a minor administrative oversight - it means the trustee regains full discretion over who receives potentially hundreds of thousands or millions of dollars. Set a reminder before the BDBN's 3-year expiry (if lapsing) and review the nomination at the same time as reviewing the investment strategy each year.
When is a non-binding nomination enough?
A non-binding nomination tells the trustee what the member wanted, but it does not force the trustee to follow that direction. It may be useful in low-conflict situations, but it gives much less certainty than a valid BDBN or reversionary pension.
When are non-binding nominations used?
Non-binding nominations may be used where:
- The trust deed does not permit BDBNs
- The member wants to give the trustee flexibility to consider changed circumstances at the time of death
- As a supplementary guide where no BDBN or reversionary nomination is in place
What are the limits of a non-binding nomination?
In an SMSF context, a non-binding nomination provides limited certainty. The trustee is obliged to consider the nomination and the member's likely wishes, but is not bound to follow them.
Where family members disagree about who should receive the benefit, a non-binding nomination can be overridden by a trustee decision. This is particularly relevant in blended families, second marriages, or situations where there is potential for conflict between surviving trustees and other family members.
In a retail or industry fund, a non-binding nomination is considered by a large institution with no personal stake in the outcome. In an SMSF, the person exercising that discretion is often the surviving spouse or another family member who has their own interests. A non-binding nomination provides much less protection in an SMSF than it does in a retail fund. Members who want certainty should use a BDBN or reversionary pension nomination.
How do reversionary pensions work?
A reversionary pension is an existing retirement-phase pension that automatically continues to an eligible beneficiary when the original pensioner dies. It can give the surviving spouse immediate continuity and a 12-month window before the transfer balance cap credit is recorded.
What happens when a pension is reversionary?
The reversionary nomination is made at the time the pension commences - not at the time of death. It specifies a single nominated beneficiary (typically the spouse) to whom the pension automatically reverts on the member's death.
- The pension continues paying to the reversionary beneficiary without any trustee decision or fund restructure at the time of death
- The income stream continues from the date of death with no break in payments
- The reversionary beneficiary's transfer balance account is credited 12 months after the member's death - not immediately. This gives time to plan for any transfer balance cap implications.
- Only SIS dependants can be nominated as reversionary beneficiaries
- Only one beneficiary can be nominated - the reversionary nomination cannot be split between multiple people
- The nomination, once made, is generally difficult to change as it is embedded in the pension documentation
How does a reversionary pension affect the transfer balance cap?
This is the most complex aspect of reversionary pensions and requires careful advance planning.
When the reversionary pension is credited to the surviving spouse's transfer balance account (12 months after death), the value credited is the value of the pension at the date of the member's death - not the value at the time of crediting.
If the credited amount, added to the survivor's existing pension balances, exceeds the survivor's personal transfer balance cap, the survivor must commute the excess within the 12-month window. Failing to act before the credit is recorded creates an immediate cap excess.
For couples with large super balances, the combined pension values on the death of the first to die can easily exceed the survivor's personal TBC of $2M. Advance planning - potentially including partial commutations before death or restructuring pension and accumulation balances - can manage this risk.
Reversionary pension or BDBN: what is the difference?
| Feature | Reversionary pension | BDBN |
|---|---|---|
| What it covers | The ongoing pension only | Any death benefit (lump sum or pension) |
| When made | At pension commencement | Any time |
| Effect at death | Immediate - pension continues automatically | After trustee acts on the direction |
| TBC credit timing | 12 months after death | When new pension commences |
| Flexibility | Limited once made | Can be revoked and updated |
| Lapsing | Does not lapse | Lapses every 3 years unless non-lapsing |
Many funds use both: a reversionary pension for the ongoing income stream, and a BDBN for any remaining accumulation balance or amounts not covered by the reversionary pension. Using both together provides the most complete coverage.
Reversionary pension and the 12-month TBC window
Margaret has a $600,000 reversionary pension. Her spouse Brian already has a $1.8M transfer balance account credit when Margaret dies.
The $600,000 credit is recorded 12 months after Margaret's death, using the value at the date of death. Brian has that 12-month window to commute $400,000 before the credit creates an excess transfer balance problem.
The 12-month window between the date of death and the TBC credit for a reversionary pension is both a planning opportunity and a hard deadline. Surviving spouses who already have pension balances close to $2M need to know this window exists and take action before it closes. The window does not extend and the ATO will not provide relief for late commutations caused by a failure to plan.
How can SMSF death benefits be paid?
SMSF death benefits must generally be cashed as soon as practicable after death, either as a lump sum, a death benefit pension to an eligible dependant, or a permitted combination. The available payment form depends on the recipient, the nomination, and the trust deed.
When is a death benefit paid as a lump sum?
Any eligible beneficiary can receive a death benefit as a lump sum. For adult financially independent children, a lump sum is the only option.
The lump sum is paid from the deceased member's account balance. If the fund holds illiquid assets (such as property or unlisted investments), the trustee may need to sell assets to fund the payment.
In-specie transfers (for example, transferring shares or property directly to the beneficiary) can avoid forced asset sales but require the trust deed to permit them and a proper market valuation at the time of transfer.
When can a death benefit be paid as a pension?
Eligible recipients - broadly spouses, minor children, disabled children of any age, and people in an interdependency relationship - can choose to receive the death benefit as an ongoing income stream rather than a lump sum.
The death benefit pension operates similarly to an account-based pension:
- The balance remains invested and continues to earn returns
- Pension phase tax treatment applies (tax-free earnings)
- Minimum drawdown requirements apply from the year of commencement
- The pension counts toward the recipient's transfer balance cap
How do child death benefit pensions work?
Death benefit pensions to children (other than those with a permanent disability) must be fully commuted and paid as a lump sum by the time the child turns 25. This is a mandatory requirement under superannuation law.
If the child has a permanent disability, the pension can continue indefinitely with no age-based commutation requirement.
Can death benefits be split between lump sum and pension?
The trustee (guided by the nomination) can split the death benefit - paying part as a lump sum and part as an ongoing pension to the same or different recipients. This can be useful where:
- One beneficiary is eligible for a pension but also needs immediate cash
- Different beneficiaries have different needs and eligibility
- Part needs to go to the estate (via the LPR) and part to a dependant directly
If the fund holds a major illiquid asset - such as a commercial property - paying a large death benefit as a lump sum may force a sale at a time and price that does not serve the fund or the remaining members. Consider in advance how the fund's assets could be used to meet a death benefit obligation and whether the trust deed permits in-specie payments of assets to beneficiaries.
How are SMSF death benefits taxed?
SMSF death benefit tax depends on the recipient's tax dependant status, whether the benefit is paid as a lump sum or income stream, and the tax-free and taxable components of the member's balance. Lump sums to tax dependants are generally tax-free, while taxable components paid to non-dependants are generally taxed.
What are the tax-free and taxable components?
Every super balance consists of two components:
- Tax-free component: Broadly, contributions made from after-tax money (non-concessional contributions) and certain other amounts. This component is never taxed in the hands of any recipient, regardless of who receives it or in what form.
- Taxable component: Broadly, concessional contributions and earnings accumulated inside the fund. This component may or may not be taxed depending on who receives it and how. For most SMSFs, this is the "taxed element" of the taxable component.
The proportion of each component in a member's balance at death determines the tax impact on beneficiaries.
How are lump sum death benefits taxed?
Most SMSF death benefits consist of the "taxed element" of the taxable component. The rates below apply to this element.
| Recipient | Tax on taxable component |
|---|---|
| Spouse, minor child, or other tax dependant | Tax-free |
| Adult financially independent child (or other non-tax dependant) | Taxed element generally capped at 15%; untaxed element generally capped at 30%. Medicare levy generally does not apply to lump sum death benefits. |
| Legal personal representative (paid to estate) | Tax depends on who ultimately receives from the estate |
How are death benefit pensions taxed?
| Recipient | Tax treatment of payments |
|---|---|
| Spouse (or other tax dependant) aged 60 or over | Tax-free |
| Spouse under 60 from a deceased member aged 60 or over | Tax-free |
| Child under 18 | Tax-free |
| Child aged 18-24 (financially dependent) | Taxable component taxed at 15% plus Medicare levy, with a 15% tax offset |
| Child with permanent disability (any age) | Tax-free |
Why does the tax-free component matter for estate planning?
Members who have made significant non-concessional contributions over their lifetime will have a higher proportion of tax-free component in their super balance. This is valuable for estate planning because the tax-free component passes to any recipient without tax - including adult financially independent children who may otherwise pay tax on the taxable component.
Some members approaching retirement consider making additional non-concessional contributions (where eligible) partly to shift the balance composition toward a higher tax-free proportion. Whether this is appropriate depends on individual circumstances and should be discussed with a financial adviser.
Taxable component paid to an adult child
Anna dies with a $1M SMSF balance. Her adult daughter Sophie is financially independent and receives the benefit as a lump sum. The balance is 30% tax-free component and 70% taxable component, all taxed element.
If the fund has an untaxed element, or if the benefit is paid to the estate with mixed tax-dependant and non-dependant beneficiaries, the tax calculation can be more complex.
The tax impact on adult children can be significant. Understanding the tax component split in a member's balance and planning for this well in advance - including whether directing super to the estate and then to children via the will achieves a better outcome - is a legitimate estate planning question that requires professional advice. The ATO's superannuation death benefits guidance explains the dependant and non-dependant treatment in more detail.
Why does the SMSF trust deed matter?
The SMSF trust deed determines what the fund can do with death benefits, nominations, pensions, in-specie payments, and trustee discretion. An outdated or restrictive deed can undermine even a carefully drafted estate plan.
What must the trust deed permit?
The trust deed must explicitly permit the following for them to be available:
- Binding death benefit nominations - if the member wants a BDBN to be binding on the trustee
- Non-lapsing BDBNs - if the member does not want the nomination to expire every 3 years
- Reversionary pensions - the deed must permit the pension type being used and the reversionary structure
- In-specie payments of death benefits - if the trustee may need to pay a benefit using fund assets rather than cash
- Death benefit income streams to dependants - the types of income stream the fund can pay
A deed set up 15-20 years ago and never updated may not permit all of these options. This is not a theoretical risk - it has been the basis of several court cases in which families discovered the trust deed did not allow the intended distribution.
How does the deed control trustee discretion?
Where no valid BDBN or reversionary nomination exists, the trust deed governs the trustee's discretion. Different deeds define this differently:
- Some deeds require the trustee to consider certain beneficiaries first (typically the spouse, then children)
- Some deeds give the trustee broad discretion to pay any SIS dependant or the estate
- Some deeds require unanimous agreement among all remaining trustees before the benefit can be paid
In an SMSF with a corporate trustee, the directors of the company (often the surviving family members) make the decision. In an individual trustee structure, the remaining trustees make the decision - which may not include all interested parties.
When should the trust deed be reviewed?
Trust deed reviews are recommended:
- When superannuation law changes materially
- When the fund's membership changes
- Before commencing a pension (to confirm the pension type is permitted)
- When a member's family circumstances change (marriage, separation, birth of a child, death)
- As part of periodic estate planning reviews - at least every few years
A deed review typically costs several hundred dollars through a specialist SMSF document provider. The cost of not reviewing can be far higher.
Should death benefits be directed to a trust or the estate?
An SMSF cannot usually pay a death benefit directly to a family discretionary trust. The usual pathway is to nominate the legal personal representative, have the benefit paid to the estate, and let the will direct assets into a testamentary trust or other estate structure.
That structure can be useful for asset protection, vulnerable beneficiaries, second marriages, or controlling when children receive capital. It also introduces probate timing, estate challenge risk, and tax complexity.
The trust deed is the foundation of every nomination and pension structure in the fund. A BDBN that is valid under superannuation law but not permitted under the fund's specific deed may be unenforceable. A reversionary pension for a pension type the deed does not allow is not a valid structure. Always confirm that the deed supports the estate planning structures the member intends to use - and have it reviewed by a specialist rather than assuming it is current.
What should SMSF trustees do when a member dies?
When an SMSF member dies, trustees need to confirm the deed, control of the trustee, beneficiary nominations, pension settings, tax position, and ATO reporting before paying the benefit. The order matters because some actions cannot be safely taken until the legal documents are confirmed.
What are the immediate steps?
- Obtain the death certificate. The trustee cannot take any formal action until the death is confirmed.
- Check the fund's trust deed for any specific requirements or restrictions on what happens next.
- Check for a valid BDBN. Confirm whether one exists, when it was signed, and whether it has lapsed.
- Check for a reversionary pension. If the deceased had commenced an account-based pension with a reversionary nomination, identify who the reversionary beneficiary is.
- Continue meeting pension payment obligations. If the deceased was receiving a pension, minimum payments must continue to the estate (or the reversionary beneficiary) until the benefit is formally dealt with.
Who controls the trustee after death?
A critical and often overlooked issue: who is the trustee after the member dies?
- Corporate trustee: The company continues as trustee. The remaining directors continue to manage the fund. New directors may need to be appointed if required.
- Individual trustees, 2 members: The surviving member may no longer satisfy the trustee rules without appointing a new individual trustee or converting to a corporate trustee structure.
- Individual trustees, sole member fund: If the sole member and trustee dies, there is no trustee left to manage the fund. This is a critical vulnerability of individual trustee structures in single-member funds. This is why many sole-member SMSFs use a corporate trustee - it avoids the fund being left without a trustee.
The fund must have a valid trustee at all times. A period without a trustee creates a compliance problem and may require court involvement to resolve.
How is the death benefit paid and reported?
Once the trustee has determined who receives the benefit:
- Pass a formal trustee resolution documenting the decision and the basis for it
- Confirm the recipient meets the eligibility requirements under the SIS Act
- Determine whether the benefit will be paid as a lump sum, income stream, or a combination
- If a new income stream is being commenced for the recipient, complete all pension commencement documentation
- Pay the benefit or commence the pension
- Report the event to the ATO via TBAR within 28 days of the end of the quarter in which the death benefit event occurs
What administration and reporting happens afterwards?
- The deceased member's account is closed once the benefit is fully paid
- The annual return for the year in which the member died must report the death benefit payment
- Any new pension commenced for the beneficiary must be reported via TBAR
- If the fund is left with only one remaining member, trustee structure compliance must be confirmed
- If the fund has no remaining members, it must be wound up
What should trustees prepare in advance?
The period immediately after a member's death is one of the highest-risk times for SMSF compliance. Trustees are grieving, documents may be hard to locate, and the rules are complex.
Consider storing the following documents somewhere accessible to the surviving trustee(s) or executor - not just in a locked drawer or a password-protected file only the deceased knew:
- Current version of the trust deed (with any deeds of variation)
- Signed BDBNs and their expiry dates (if lapsing)
- Pension commencement documents and reversionary pension nominations
- Member transfer balance account records
- Contact details for the fund's accountant, auditor, and any financial adviser
What SMSF death benefit mistakes should trustees avoid?
The most damaging SMSF death benefit mistakes usually involve control, documentation, beneficiary eligibility, tax, or timing. Many can be avoided by reviewing the deed, nominations, pensions, and trustee structure before a member dies.
9 common death benefit and estate planning mistakes
- 1Assuming the will controls the SMSF. Super does not automatically form part of the estate. A will only controls the death benefit if the fund pays it to the legal personal representative.
- 2Letting a lapsing BDBN expire. If a lapsing nomination is not renewed on time, the trustee may regain discretion over the death benefit.
- 3Nominating someone who is not eligible. A BDBN that names an ineligible recipient can fail, especially where the member tries to nominate siblings, parents, or a family trust directly.
- 4Ignoring adult child tax. Financially independent adult children can usually receive a lump sum, but the taxable component is generally taxed.
- 5Assuming every pension continues automatically. A pension only continues automatically if it was properly set up as reversionary or the deed and documents support a new death benefit pension.
- 6Missing the 12-month TBC window. A surviving spouse who receives a reversionary pension may need to commute an excess before the transfer balance account credit is recorded.
- 7Failing to plan for trustee control. Individual trustee structures can create control problems after death, particularly for sole-member funds.
- 8Forgetting liquidity. A fund with property or other illiquid assets may struggle to pay a lump sum death benefit without a forced sale.
- 9Not documenting the trustee decision. Death benefit payments should be supported by minutes, eligibility checks, valuations, tax component calculations, and ATO reporting records.
Common SMSF death benefit questions
These short answers cover the questions trustees and beneficiaries most often ask when reviewing an SMSF estate plan or dealing with a member's death.
Does my will control my SMSF death benefit?
No. Super usually sits outside the will. The SMSF death benefit is paid according to the fund deed, super law, and any valid BDBN or reversionary pension nomination.
Who can receive an SMSF death benefit?
An SMSF death benefit can generally be paid to a spouse, child, financial dependant, interdependency relation, or the deceased member's legal personal representative.
What is a binding death benefit nomination?
A BDBN is a formal direction to the trustee about who must receive the death benefit. It only binds the trustee if it is valid under the fund deed and superannuation law.
Can adult children receive an SMSF pension after death?
Financially independent adult children generally cannot receive an ongoing death benefit pension. They can usually receive a lump sum, and tax may apply to the taxable component.
Are SMSF death benefits taxable?
It depends on the recipient, payment form, and tax components. Lump sums to tax dependants are generally tax-free, while taxable components paid to non-dependants are generally taxed.
What is a reversionary pension?
A reversionary pension is an existing pension that automatically continues to an eligible beneficiary, usually a spouse, when the original pensioner dies.
Can an SMSF death benefit be paid to a trust?
An SMSF generally pays death benefits to eligible superannuation recipients or the estate, not directly to a family discretionary trust. A testamentary trust may be used through the will if the benefit is paid to the legal personal representative.
What happens if a BDBN expires?
If a lapsing BDBN expires, it is no longer binding. The trustee may need to exercise discretion under the deed unless another valid direction applies.
Does a reversionary pension count toward the survivor's transfer balance cap?
Yes. The survivor's transfer balance account is credited 12 months after death, using the value of the pension at the date of death.
What should trustees do first when a member dies?
Trustees should obtain the death certificate, check the deed, confirm trustee control, locate any BDBN or reversionary pension documents, and seek specialist advice before paying the benefit.
Related resources: The SMSF Pension Guide covers reversionary pensions, death benefit pensions, and transfer balance cap issues in more detail. The Rules & Limits Reference covers trustee rules and core SMSF limits. Key reporting dates are listed in the SMSF Compliance Calendar.