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Man signs Binding Death Benefit Nomination in favour of de
facto spouse
A recent dispute in the Supreme Court of NSW involved a binding
death benefit nomination and a superannuation trustee.
A man and his de facto spouse had lived together with their two
small daughters for five years, when in October 2019, he was
diagnosed with inoperable pancreatic cancer.
As his condition worsened, he began putting his affairs in
order.
In November 2019, he instructed his lawyer to prepare a
will.
The man's assets included a superannuation death benefit in
excess of $4.7 million.
He instructed his lawyer that he wanted this death benefit to be
paid to his estate, and for the authority to be given to apply the
benefit towards discharging debts.
On 15 July 2020, the man was admitted to hospital for palliative
care.
On 23 July 2020, he executed his last will, which was prepared
by his solicitor in accordance with the instructions given in
November 2019.
On 24 July 2020, the deceased instructed his lawyer to prepare a
Binding Death Benefit Nomination (BDBN), directing that in the
event of his death, the superannuation fund was to pay the $4.7
million death benefit to his spouse. This differed from his
original instructions to pay the death benefit to his estate.
At around 12pm on 26 July 2020, the spouse received a call from
the man's doctor, to tell her that the man's condition had
deteriorated, and he was being transferred to the ICU.
Then at around 1pm on the same day, the deceased signed the BDBN
in favour of his spouse.
He died later that day.
Trustee of superannuation fund refuses to pay benefit and
spouse sues
Following the man's death, the superannuation fund trustee
refused to pay the death benefit to the spouse, claiming the BDBN
was invalid because the deceased lacked mental capacity when he
signed it.
The spouse applied to the Supreme Court of NSW for a declaration
that the BDBN was valid and binding and for an order that the $4.7
million benefit be paid to her forthwith.
CASE A
The case for the trustee
CASE B
The case for the spouse
At the time the deceased signed the BDBN, he lacked mental
capacity to enter that transaction.
The decision to enter into a BDBN is a complex one. The
deceased's ability to comprehend material of significant
complexity was impaired when he signed the BDBN.
When the deceased gave his lawyer instructions to prepare the
BDBN, the lawyer was so concerned that she made a file note of
their conversation, noting of the deceased that he "Sounds
confused. Medication?... Concerned re capacity --> sounded
drugged up."
On the day that the deceased signed the BDBN, he had been
transferred to the ICU because he was so ill, and he had been given
doses of morphine and lorazepam. As the medical expert testified:
"...the hospital records suggest that [the patient] was
drowsy... and a person who is affected by morphine and lorazepam to
the extent they are drowsy will also experience effects of
difficulty concentrating and impaired comprehension, particularly
in matters of some complexity."
This last-minute change by the deceased went against his
carefully considered estate plans, which he had previously
discussed in detail with his lawyer. He had been clear that he
wanted his death benefit paid to his estate, so his executors could
discharge liabilities using those funds. He had also expressed
concerns that his spouse was not a good saver, that she would not
be able to manage assets on her own, that she might re-partner in
the future and that the assets he had accumulated for the benefit
of his children would not be protected if there was an outright
gift or sole control given to her.
The court must find that the deceased lacked mental capacity to
sign the BDBN and so it is void and unenforceable.
At the time my spouse signed the BDBN, he had mental capacity
to enter that transaction.
A BDBN is not a particularly complicated document, and my
spouse was absolutely capable of comprehending it at the time he
signed it. He was a highly intelligent man with a general medical
practice for many years and degrees in medicine, economics and law,
as well as a masters degree in business administration. Even during
the final days before he died, he was able to have detailed
conversations with his doctors about his medical condition and his
professional life.
My partner also signed his will only days before he died, at a
time when his morphine dosage was at its peak, and no one is
disputing his testamentary capacity. So why wouldn't he also
have capacity to sign the BDBN?
I visited my spouse on the day that his lawyer wrote her file
note questioning his capacity. He did not appear drowsy, confused,
or have difficulty concentrating. In fact, it was the best I had
seen him in a long time.
When my spouse requested that his lawyer prepare the BDBN, he
gave a reasonable explanation for changing his mind. He told her
that his accountant had advised him that he should pay the money
directly to me for tax reasons. Then, when he signed the BDBN, he
reaffirmed this. His doctor asked him: "Do you know what you
are signing?" and my spouse said that the document related to
his will and that it would prevent his spouse from being
"taxed out of her brains".
The medical expert has acknowledged that it was not possible to
know the extent to which my spouse's cognitive function was
impaired due to the medications administered. No one has given any
positive evidence that my spouse could not understand the
consequences of signing the BDBN.
In any event, even if my partner was cognitively impaired on
the day he signed the BDBN, the BDBN was nevertheless valid, since
it was executed in accordance with instructions he had given two
days earlier, at which time he fully understood what he was
doing.
The court must find that my spouse had mental capacity to sign
the BDBN and so it is valid and binding.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
