SMSF trust deeds in their current form are obsolete and should instead enable tailoring and flexibility as certain funds face ambiguous enduring power of attorney (EPOA) and binding death benefit nomination (BDBN) issues, an industry lawyer has said.
During DBA Lawyers’ recent webinar, special counsel Bryce Figot said in the case of Retail Employees Superannuation Pty Ltd vs Pain , Justice Blue deemed the structure and drafting of the BDBN provisions of the Superannuation Industry (Supervision) Act gave rise to ambiguities, uncertainties and potentially unintended consequences.
“When it comes to the holder of an EPOA being able to make, remake, revoke or alter a BDBN, the answer is ambiguous,” Figot said.
“If there was a trust deed that expressly said the holder of an EPOA could do it, and if the EPOA said it and if your BDBN said it, then I think that could be a yes, though the Australian Law Reform Commission (ALRC) has acknowledged the [law] is exhaustive and ambiguous.”
His comments came in light of the ALRC report, “Elder Abuse – A National Legal Response”, highlighting the body’s concern about lost capacity in the context of SMSFs.
“It’s becoming more of a big deal,” he said.
“Remember the report also recommended that SMSFs should have replaceable rules which provide a mechanism for an enduring attorney to become a trustee/director where this was provided for in the enduring document and notwithstanding the terms of the trust deed and constitution of the corporate trustee or the actions of the other trustees/directors.
“I agree completely and I’d go even further than that.”
The use of deeds for SMSFs in the present day was outdated, he said.
“There could just be default governing rules [to enable] tailoring and I think a minority of funds would want something tailored as the majority would want the generic rules,” he noted.
“This was a proposal made a number of years ago, but it lost steam.
“The ALRC is an important body and when they make recommendations, they often do get acted upon.”