Trustee discretion 

As a general rule upon the death of a member, the trustees of the SMSF have the obligation to decide who to pay the deceased’s death benefits to unless there is a binding death benefit nomination in place, or the trust deed specifies how death benefits are to be paid. 

This is why it is important to determine who will be invited to become members of the SMSF, and accordingly the trustees, carefully. 

The deceased member’s Legal Personal Representative (usually the Executor) may step into that member’s role as trustee until the death benefits start to be paid unless remaining members are able to appoint another replacement. 

Where there is no binding death benefit nomination in place, the trustees need to identify all the potential beneficiaries and then consider who will receive the benefits. This does not need to be an equitable decision and does not even need to be fair. However, the extent of dependency of the beneficiary on the deceased member is a critical issue that will need to be considered.  A super death benefit can only be paid to a SIS dependant as described below.