Many BDBN choices are made where one spouse nominates the other spouse 100% and the other spouse reciprocates and nominates the other spouse 100%. Therefore only one of these BDBNs will work (and none if both spouses pass away at the same time).

Consideration of the direction of BDBN and/or reversionary pension benefits after the "first onion layer" of beneficiaries may be a forgotten consideration where having the BDBN and/or reversionary pension ordered and signed is enough effort for the members, especially if the SMSF is not the primary holding of family wealth given contributions and account balance caps both in force and before Parliament.

This would leave the beneficiaries outside of these instruments up to the discretion of the trustee (who may be left as a legal personal representative (LPR) if all members have passed away as was the case here). 

SMSF governing rules would generally cascade death benefits discretionary distributions by the trustee through "dependants" of the members in the absence of a BDBN or reversionary pension in accordance with SIS Regs rr 6.21(2), 6.21(2A) (lump sum) or 6.21(2B) (if a pension is allowed under trustee discretion in the SMSF governing rules - see Rushton v CSC [2021] FCA 358).

The ATO confirms this as its view in SMSFD 2008/3 at paragraph 6 that the payment of death benefits from a superannuation fund is ultimately a matter for the discretion of the trustee of the fund unless legislation or the governing rules provide otherwise. 

In the decision of In the matter of Gainer Associates Pty Limited [2024] NSWSC 1138, the Court amongst other things gave advice to uphold the decision of the self managed superannuation fund (SMSF) trustee to distribute 1/3rd of the death benefits in the SMSF to a partner of the sole surviving SMSF member and 2/3rd to her estate. 

There was no BDBN in place and both spouses were deceased, leaving a de-facto spouse of the last surviving spouse to challenge for the superannuation death benefits. 

But the trustee had discretion to distribute the assets under the SMSF governing rules.

This case has many technical legal issues. 

But for a simple superannuation plan it serves as a reminder to sign a BDBN and/or reversionary pension nomination for certainty as to distribution of your superannuation benefits, which may also be distributed under your will, as in this case, but which is then subject to taxes best advised to you by your estate planning lawyer.

If you don't have dependant children or a spouse to distribute your superannuation to, or consider spouses passing away in close together as in this case, then you may wish to consider a mechanism to withdraw your superannuation to a relative or loved one before death.