Peter McNamara has previously warned that you get your superannuation death benefits sorted: http://www.cml.com.au/wills-smsfs-and-binding-death-benefit-nominations-get-yours-in-line
Now a recent case shows that you should get your powers of attorney sorted as well.
What happens to your superannuation if you lose capacity? Your superannuation death benefits will be dealt with as set out in the superannuation trust deed. Most super trust deeds permit members to make Binding Death Benefit Nominations (BDBN). So what happens if you have an accident, or get dementia, and have not made a BDBN, or circumstances have changed, and you cannot make or change a BDBN?
In one case, the member made a binding death benefit nomination that lapsed after 3 years. The question was, could the member’s power of attorney extend the nomination, or make a new one?
The Queensland Supreme Court has found that an attorney can extend a BDBN, but not make a new one.
Mr Giles was a member of a SMSF. He became incapable of making financial decisions. His wife and sister managed his finances. He had made a BDBN nominating that super death benefits be paid to his wife (47.5%), his son (47.5%) and his sister (5%). The BDBN had two problems: it lapsed after 3 years, plus his sister would not be a dependent. His wife and sister decided that his power of attorney be used to sign two documents: an extension document, extending the death benefit nomination for another 3 years, and a new death benefit nomination of his wife and son (50% each).
The Queensland Supreme Court said that the extension of the BDBN was fine, it just continued his wishes and was not prohibited by the “no conflict’ rules in the Queensland legislation. However, the court said that the new BDBN was not fine, it was beyond the wife attorney’s authority per the Queensland POA legislation.
NSW has its own POA legislation. The NSW Powers of Attorney Act prohibits an attorney from conferring a benefit on the attorney, unless expressly authorized by the POA.
In NSW, both the extension and the new nomination would probably be beyond the attorney’s power, unless the power of attorney expressly permitted the attorney to make BDBNs and to confer a benefit on the attorney.
Most powers of attorney do not state whether your attorney can do a binding death nomination, and do not expressly permit the attorney to nominate the attorney.
The simple lesson from this case is that when your review any of these, review the others as well:
- Will
- Superannuation BDBN
- Enduring Power of Attorney
The case is Re Narumon Pty Ltd [2018] QSC 185
https://www.queenslandjudgments.com.au/case/id/311718
As a footnote, apart from the POA problem, the case should prompt you to ask your superannuation and tax advisors whether your SMSF trust deed unnecessarily incorporates the 3 year nomination lapsing rules that do not apply to SMSF trust deeds (see Munro v Munro (2015) 306 FLR 93).
Contact Peter McNamara for your estate planning advice today