“Some commentators have advocated that you should have a BDBN that overrules everything,” explained Mr Hill.

While Mr Hill said this may be an appropriate approach for some clients, there are a wide range of issues to consider.

Smarter SMSF chief executive Aaron Dunn said ideally clients shouldn’t be forced down a particular path with their succession planning, as there may be reasons why one particular avenue is better than another.

“It’s about understanding the client's circumstances and getting advice around that, to ensure that you have a more bespoke approach [based] on the decisions for that particular individual,” explained Mr Dunn.

One approach to achieving more flexibility in terms of succession planning, explained Mr Dunn, is to incorporate the concept of a ‘paramount document’ into the trust deed which sets out which document will have priority where there is conflict between different documents.

“This allows you to elect one document to have as the paramount document which then overarches any other document in conflict with that,” he said.

Mr Hill said having flexibility with succession planning could be important, for example, where a pension is going to be in excess of the recipient’s transfer balance cap and there is a blended family involved.

“If the pension that’s going to be paid will be in excess of the spouse’s transfer balance cap, then perhaps that part could be transferred out as a lump sum to a child from a previous relationship,” he explained.

“So, this paramount agreement can allow for a more custom outcome when we're dealing with excess transfer balances,” he said.

While this could also be achieved through with a BDBN, Mr Dunn said the BDBN could become “quite complex and detailed in terms of all the machinations”.

“Whereas what you could have here is a combination of pension documents and a BDBN to achieve the outcome the client wants in different scenarios,” he explained.

Mr Hill stressed that the most important thing for SMSF clients with succession planning is having certainty.

“So if your existing deed is silent on whether a BDBN trumps a reversionary pension or vice versa, then I would upgrade the deed.”

Law firm Cooper Grace Ward Lawyers said there are plenty of different arguments around whether a binding death benefit nomination or reversionary pension should take precedence. 

“In our deed and most other deeds out there, normally a reversionary pension takes precedence, but there are a number of deeds that are silent on this issue,” explained Cooper Grace Ward Lawyers partner Clinton Jackson.

“Our preference is reversionary pension because we think there's some legal arguments that would support that if the deed is silent, that your reversionary pension would win,” said Mr Jackson.

Given that there hasn’t been a case on this particular issue, Mr Jackson said this means that where a deed is silent on the issue, there is a risk that the binding death benefit nomination or reversionary pension will not take effect as the client intended it to.

Clients with multiple type of documents, he warned, need to ensure their deed makes it clear which one takes priority.

“Where we have clients with multiple types of documents, we firstly need to look at why they are inconsistent with each other and sometimes there may be good reason for that. There may be good reason to have a reversionary pension to one person and a binding nomination to someone else, but we need to look at which one is going to take precedence if both are operative,” explained Mr Jackson.

Cooper Grace Ward Lawyers patter Scott Hay-Bartlem said it doesn’t really matter which one takes precedence provided SMSF professionals and their clients “know what it is, they follow the deed and they’ve got them in the right order”.