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Cooper Grace Ward Lawyers’ Partner Scott Hay-Bartlem, Partner Clinton Jackson, and Senior Associates Hayley Mitchell and Steven Jell discuss how the Supreme Court of Queensland has now confirmed, in Re Narumon [2018] QSC 185, that an attorney has the power to make, renew or extend a superannuation binding nomination on behalf of a member. Cooper Grace Ward acted for the trustee of the self-managed superannuation fund in the application to the Supreme Court. Legalwise News previously published the firm’s first article on the matter.
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The decision will have a significant impact in the approach to an estate plan, binding nominations, the appointment of attorneys, and restrictions and powers in enduring power of attorney documents.
THE MEMBER’S BINDING NOMINATIONS
The member made a BDBN in 2013, which was to lapse after three years. Shortly after making the BDBN, the member lost capacity. Before the BDBN lapsed in 2016, the member’s attorneys signed two documents:
- a new BDBN; and
- a letter to the trustee of the fund confirming an extension of the 2013 BDBN.
The extension of the 2013 BDBN confirmed the terms of the original 2013 BDBN, which had nominated 5% of the death benefit be paid to a person who was not the member’s dependent or legal personal representative.
To avoid the potential of the 2013 BDBN and extension being invalid due to the nomination of a non dependent, the new BDBN signed by the attorneys changed the nomination to split the 5% between the remaining dependents nominated in the original 2013 BDBN.
WERE THE BINDING NOMINATIONS VALID?
First, the Court confirmed the original BDBN made by the member in 2013 was a valid nomination, despite the 5% nomination to a non-dependent.
- The Court agreed with the decision of Mullins J in Munro v Munro (2015) 306 FLR 93, that regulation 6.17A of the SIS Regulations does not apply to self-managed superannuation funds and confirmed that it is the trust deed alone that governs the form under which a BDBN can be given in an SMSF.
- The Court accepted our submission that 5% nomination to the non-dependant does not affect the validity of the nomination as a whole. Applying a ‘practical and purposive’ approach, the Court held that the original 2013 nomination was of no effect only to the extent of the 5% nomination to a non-dependent.
Second, the Court held that an attorney has the power to make a BDBN on behalf of a member.
- The Court determined that there is no restriction within the superannuation legislation prohibiting an attorney from making a BDBN on behalf of a member and, in this case, the terms of the deed specifically allowed it.
- However, it was also necessary to determine whether this was within the attorneys’ powers under the relevant law governing enduring powers of attorney as there was no existing legal authority.
The Court found that the making of a BDBN is a matter relating to the member’s financial matters (over which an attorney can exercise power), and that it is not an act that must be performed personally (agreeing that the making of a BDBN is not a testamentary act). Therefore, it is a financial matter that can be delegated to an attorney.
Third, the Court had to consider whether the extension of the BDBN or the new BDBN made by the attorneys was a conflict transaction (as one of the attorneys or their family members benefited from the nomination).
- In this respect, the Court agreed that the reason for making the extension of the original BDBN was ensure the member’s estate planning wishes were carried out so the attorneys’ interests coincided with the member’s, rather than conflicted.
- However, in determining whether the making of the new BDBN (which reallocated the 5% invalid nomination), the Court did not accept that this was not a conflict of interest and, in the absence of the member’s enduring power of attorney document allowing such a conflict, the new BDBN could not be valid.
TAKE CARE WITH EPOAS AND BDBNS
The decision provides clarity on the important issue of whether an attorney can make, renew or extend a BDBN on behalf of a member.
Existing estate plans, in particular enduring powers of attorney and BDBNs, will need to be reviewed to ensure:
- enduring power of attorney documents allow attorneys to renew, extend or make binding nominations on behalf of a member where appropriate; and
- 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).
Advice on the appointment of an attorney and on whether to include (and the drafting of) conflict clauses will now need to be considered with extreme caution in light of today’s decision.
Attorneys seeking to make, renew or extend a BDBN on behalf of a member will need to exercise that power with care having regard to the member’s wishes, the terms of the SMSF trust deed and the terms of the enduring power of attorney.
Access the judgement here.
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. The authors can be contacted for any queries.
Scott Hay-Bartlem and his team specialise in advising on tax, superannuation, structuring and restructuring, and estate planning and succession. This includes assisting accountants, financial planners, lawyers and other professional advisers with helping their clients deal with these issues. Scott regularly provides training sessions on superannuation, tax and estate planning and succession issues and is an SMSF Specialist AdvisorTM accredited by the SMSF Association. Scott is listed in Best Lawyers Australia for Superannuation Law, Trusts and Estates, Wealth Management / Succession Planning Practice. Additionally, Scott was named Best Lawyers’ 2016 Brisbane Wealth Management / Succession Planning Practice ‘Lawyer of the Year’ as well as Best Lawyers’ 2019 Brisbane Superannuation ‘Lawyer of the Year’. Contact Scott at scott.hay-bartlem@cgw.com.au
Clinton Jackson, part of the commercial team, advises his clients on an extensive range of commercial and corporate matters, business mergers, acquisitions and sales, tax and structuring issues, self-managed superannuation, asset protection and succession, restructuring and exit strategies. Clinton’s unique range of expertise enables him to assist his clients with both their personal and business legal issues and to advise through all phases of the business/investment lifecycle. Clinton is an accredited specialist superannuation adviser with the SMSF Association and is a highly sought after speaker who regularly presents at seminars and conferences. Contact Clinton at clinton.jackson@cgw.com.au
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Hayley Mitchell is a Succession Law Accredited Specialist (Qld) and a senior associate in the commercial team at Cooper Grace Ward. Hayley practices in estate and trust disputes, estate planning, and estate administration. Hayley has experience in providing a broad range of advice involving executor’s duties, beneficiaries’ rights, problematic and contentious estate administration, and matters involving attorneys, administrators and guardians. Her particular areas of interest are family provision claims, Will disputes and testamentary capacity, contentious applications for probate and letters of administration, and contentious superannuation death benefit applications. Contact Hayley at hayley.mitchell@cgw.com.au
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Steven Jell, a Senior Associate in Cooper Grace Ward’s commercial team, provides clients with key estate planning and succession planning advice as well as broader transaction-based commercial legal services. Prior to joining the team at Cooper Grace Ward in 2018, Steven practised in Melbourne delivering sophisticated estate planning and commercial solutions to high net worth, high-profile and business clients. Steven uses his experience to take a proactive approach to the implementation of various strategies and structures aimed at the intergenerational transfer of wealth and the mitigation of potential litigation risks as well as providing commercially viable solutions to business clients. Contact Steven at steven.jell@cgw.com.au
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