The recent case of Re SB; Ex Parte AC  QSC 139, has confirmed that the decision to make a binding death benefit nomination is a financial matter and therefore can be made for a person by their administrator (or attorney).
This case further reinforces the decision in Re Narumon  2 Qd R 247 (in which Cooper Grace Ward acted), where the Court found that the member's attorney appointed under an enduring power of attorney could make a binding death benefit nomination on behalf of a member who had lost capacity.
Take extreme care with EPOAs and SMSF trust deeds
This most recent case reinforces the importance of having a properly structured estate plan, including enduring powers of attorney and SMSF trust deeds that work together to ensure your attorneys only have the powers you intend them to have.
Although the ability of the administrator in this case (and the attorney in Re Narumon) to make a binding death benefit nomination on behalf of the incapacitated member was important to achieving the desired outcome, this may not be appropriate in all circumstances.
There are circumstances where it would be possible for an attorney or administrator to use these powers in a way that would defeat the intended outcome of a client's estate plan.
It is therefore essential that existing estate plans, in particular enduring powers of attorney and SMSF trust deeds, are reviewed to ensure:
- enduring power of attorney documents allow attorneys to renew, extend or make binding nominations on behalf of a member where appropriate
- attorneys are not given inappropriately broad powers that potentially allow them to make a nomination that is inconsistent with the member's estate planning wishes (we see many enduring powers of attorney where all conflicts are authorised).
Unfortunately, we are continuing to see many enduring powers of attorney and SMSF trust deeds that give attorneys almost unlimited power to change how a superannuation death benefit. This can lead to significant issues for the advisers involved if this is not consistent with their client's desired outcome.
The facts in Re SB
This case involved an adult (SB) who was left paralysed after a motor vehicle accident. As a result of the accident, SB was not able to manage her financial matters and one of SB's sons was appointed as an administrator (for financial matters other than the damages settlement from the motor vehicle accident).
Approximately $6.75 million of the damages settlement was invested into the Perpetual Private Person Wrap Superannuation Fund for SB.
The trust deed for the Fund provided that, on the death of SB, the trustee had to pay a superannuation death benefit:
- to the persons specified in a non-lapsing nomination (a binding death benefit nomination); or
- if there was no non-lapsing nomination, to one or more of the member's dependants and legal personal representative as determined by the trustee using their discretion.
The Court considered whether the son, as administrator, had the power to make a binding death benefit nomination directing the trustee to pay the death benefit to the estate.
The question in this case was whether a binding death benefit nomination is a testamentary act or a financial matter (being an act pursuant to a contract between the trustee and the member).
An administrator can do anything in relation to a financial matter, but they cannot make or revoke a Will or undertake a testamentary act.
The Court found that the execution of a binding nomination was a financial matter, and not a testamentary act, and the administrator was able to make a binding death benefit nomination in favour of the legal personal representatives of SB.
Estate planning documents, particularly enduring powers of attorney and SMSF trust deeds, should be reviewed now to ensure attorneys have only the power you intend them to have.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.