Can an attorney sign a Binding Death Benefit Nomination on behalf of an SMSF member?
Court decision has wide implications for participants in the SMSF industry.
The recent Queensland Supreme Court decision of Re Narumon QSC 185, confirmed that, at least in that jurisdiction, an attorney (appointed under an enduring power of attorney) has the power to make, renew or extend a Binding Death Benefit Nomination (BDBN) on behalf of a member.
This case has wide implications on BDBNs, estate planning, the appointment of attorneys and restrictions on an attorneys powers. In particular, attorneys will need to take care when making, renewing or extending a BDBN.
Mrs Giles and Mrs Keenan (together, Attorneys) were appointed as the attorney for Mr Giles pursuant to an enduring power of attorney entered into in 2013 which appointed the Attorneys to make decisions on behalf of Mr Giles with respect to personal/health and financial matters should Mr Giles become ‘incapable of making [his] own decisions’.
Mr Giles passed away on 14 June 2017. The final BDBN executed by Mr Giles expired on 5 June 2016, three years after it was signed and directed the trustee of the fund, after Mr Giles’ death, to distribute his benefits (which included $1million in an accumulation account and a $3million lifetime pension) as follows:
- 5% to his wife Mrs Giles
- 5% to his son Nicholas Giles
- 5% to his sister Mrs Keenan.
Issues with Mr Giles’ final BDBN
Given that the BDBN had expired by the time Mr Giles had lost capacity, the Attorneys had to decide whether to extend Mr Giles’ BDBN by confirming it in accordance with superannuation law.
Further, the BDBN directed that 5% of Mr Giles’ benefits be paid to Mrs Keenan, who was not a dependant of Mr Giles as was required by the terms of the fund’s deed. Accordingly, this meant that the BDBN, to the extent it distributed benefits to Mrs Keenan, was of no effect.
To solve these issues, the Attorneys:
- signed a document on behalf of Mr Giles entitled ‘extension of binding death benefit nomination’ which confirmed and extended the term of Mr Giles’ BDBN for a further 3 years (Extended BDBN)
- signed a new BDBN, removing Mrs Keenan as a beneficiary and giving Mrs Keenan’s 5% interest to Mrs Giles and Nicholas Giles equally (New BDBN).
It is not entirely clear on the facts why the Attorneys signed both an Extended BDBN and a New BDBN.
The court was required to consider whether the Attorneys had the power to make a new BDBN on behalf of the member.
Whether the Attorneys had the power to confirm or extend an existing BDBN or make a new one on behalf of a member depends on consideration of:
- the fund’s deed
- the statute of the State or Territory which governs the relevant enduring power of attorney
- superannuation law.
The court, being the first court to decide on the question, held that it was within the scope of an attorney to execute a new BDBN or extend an existing BDBN on behalf a member.
The court considered that:
- nothing in Mr Giles’ fund deed prohibited an attorney from signing a BDBN on behalf of a member (rather clause 5.4 of the fund’s deed contemplated that a power given to a member can be exercised by an attorney)
- nothing in the Superannuation Industry (Supervision) Act 1993 (Cth) or Superannuation Industry (Supervision) Regulations 1994 (Cth) prohibited an attorney from doing so
- the exercise of the power was not prevented by the Powers of Attorney Act 1998 (Qld) (Qld Act).
What does the Qld Act say?
Section 32 of the Qld Act permits an attorney acting under an enduring power of attorney, to do
‘…anything in relation to 1 or more financial matters or personal matters for the principal that the principal could lawfully do by an attorney…’.
Things which an attorney cannot do include matters which may require personal performance as set out in section 3 of Schedule 2 of the Qld Act. This section does not list entry or renewal of a BDBN as requiring personal performance.
The court found that entry into the enduring power of attorney was:
- a ‘financial matter’
- was not required to be ‘performed personally’
- the fund’s deed did not prohibit delegating the exercise of a power to an attorney, rather it expressly permitted it.
Was there a conflict?
An attorney is permitted to enter into a ‘…conflict transaction only if the principal authorises the transaction, conflict transactions of that type or conflict transactions generally…’ . A conflict transaction is one which includes, amongst other things, a conflict between a duty of an attorney towards the principal and the interests of the attorney.
Mr Giles did not authorise any conflict transactions in his enduring power of attorney. The court found that the transactions entered into by the Attorneys in the Extended BDBN did not amount to ‘conflict transactions’. This was because the Extended BDBN was entered into for the purpose of ensuring the continuity of Mr Giles’ estate planning and to ensure his wishes were effected to the maximum extent possible. The fact that Mr Giles’ enduring power of attorney did not permit a conflict did not matter.
The court made orders giving effect to the Extended BDBN but did not make orders with respect to the New BDBN. This case illustrates that individuals need to be careful when appointing attorneys and when deciding whether or not to permit an attorney to enter into a conflict transaction. Attorneys should also ensure that they take care when making, renewing or extending a BDBN.
 Section 73 of the Qld Act.
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