The issue of whether a binding death benefit nomination (BDBN) directing superannuation benefits away from an estate can be made by someone holding an enduring power of attorney for an SMSF trustee appears to remain unsettled in case law across the states, according to an SMSF legal expert.
Cooper Grace Ward partner Hayley Mitchell said a series of legal decisions up to early 2020 had appeared to settle the matter in Queensland, but a case in the New South Wales Supreme Court later that year raised questions as to whether an attorney was able to direct benefits outside the estate without breaching their duties to act in the best interests of the member.
Mitchell said prior to 2018 there was no case law to test whether a binding nomination was a testamentary act and therefore unable to be made by an attorney, but the Re Narumon case, heard in the Queensland Supreme Court, found a BDBN was not a testamentary act and an attorney had the power to make those nominations.
“In that case, the outcome was you need to exercise caution because an attorney can’t enter into conflict transactions. So, if an attorney makes a BDBN in favour of themselves, it’s going to be a potential conflict of interest,” she said.
She said this outcome had been affirmed in May 2020 in the Re SB; Ex parte AC case, also heard in the Queensland Supreme Court, but a further decision in NSW in mid-2020 offered a different interpretation.
“We got a decision out of the NSW Supreme Court in July 2020 that dealt with an administrator, so it’s slightly different to an attorney, but the overarching principles are the same,” she said in reference to G v G (No 2).
“This case means we really do need to exercise caution where we’ve got an attorney contemplating making a binding nomination.
“We do have clear authority in Queensland that an attorney can make a binding nomination, but they are single-judge decisions and I think if this was to be looked at again, G v G might throw that into a bit of doubt.
“The conclusion in that case is an attorney or an administrator is in a fiduciary position. Any decision they make to direct the super proceeds away from the estate of the member – so if they’re making a binding nomination to someone else personally – then it’s going to be in conflict with their responsibility to act in the best interests of the member.”
She also noted Western Australia had taken a counterview to Queensland in the SM (2019) case, heard before the State Administrative Tribunal, which found making a BDBN was a testamentary act and not within the proper functions of an administrator.
