The decision of the Supreme Court of Queensland in the recent case of Re Narumon Pty Ltd  QSC 185 highlights the importance of having a correctly drafted binding death benefit nomination (‘BDBN’) which is non-lapsing as it gives a validly appointed attorney the power to amend the BDBN on behalf of the self-managed superannuation fund (SMSF) member and a superannuation trust deed the provisions of which permit such an amendment of the BDBN to be made.
The proceeding involved a member of an SMSF who no longer had legal capacity, and the purported extension of the member’s expired BDBN by the holder of his enduring power of attorney signing a document referred to as an “extension of death benefit binding nomination form”.
The Court upheld this as valid based on the provisions in the member’s trust deed which expressly allowed a validly appointed attorney/s to exercise any power given to a member in the deed if the member had a legally recognized disability. Importantly, the Court also found the member’s financial enduring power of attorney did not contain restrictions on the attorney’s power, and ruled that the purpose of signing such an extension was in accordance with the member’s original wishes.
If you are a members of an SMSF, it is pertinent for you to consider the issues raised in this case and take a few simple steps to ensure the following:
- That there are provisions within your deed to avoid any costly and unnecessary complications by checking that the fund’s deed allows a member to make a “non-lapsing” BDBN so that it does not need to be renewed every three years and to prepare a BDBN accordingly;
- Consider whether you are comfortable granting your power of attorney the authority to make an amendment to your BDBN due to loss of mental capacity if circumstances were to change;
- If so ensuring that your power of attorney document provides an express clause in which the attorney’s power is addressed regarding your BDBN with any desired limitations, and
- Further, depending on circumstances and jurisdiction, it may also be necessary to provide a clause which expressly permits the attorney to defend any attempts by a party who objects to alteration of the terms of the BDBN by your attorney.