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BDBNs, SMSF

Digital BDBN approval very risky

Digital BDBN

Executing a binding death benefit nomination is legally allowable, but exposes SMSF trustees to a significantly higher level of risk.

A superannuation lawyer has advised against authorising binding death benefit nominations (BDBN) electronically due to the numerous layers of risk involved with the practice.

DBA Lawyers senior associate William Fettes cited the decision in Re Curtis [2022] VSC 621 as a demonstration of the intricacy and risks involved with digital authorisation of documents.

The presiding judge in the case deemed a will not to be properly executed because only the witnesses’ faces and not their hands could be seen when they supposedly approved the document. This was despite the relevant parties going to great lengths to ensure the Zoom meeting was recorded and covered off all the contingencies they had recognised.

“I think it’s really a good case to highlight how fraught this stuff is. Technically you can execute a BDBN electronically if you clear [a number of] hurdles and you’re okay with the potential risks involved,” Fettes noted during his firm’s most recent online SMSF update.

“I don’t think there is usually going to be a good justification for it. Why take all that risk?”

Further, he pointed out having to navigate state and territory laws governing digital document approval was very difficult.

“The state and territory laws dealing with e-execution and witnessing, particularly for deeds, is a nightmare. They differ [greatly and] you’re often going to need very specific wording in the witness-attesting part,” he revealed.

“What a mess. I am not a big fan.”

As such, he suggested trustees will not be able to rely on what are considered conventional processes when considering the digital approval of a BDBN and best practice may require a wet signature anyway.

“So standard witnessing provisions in an SMSF deed and BDBN template are not going to be good enough [in these situations] … and you really should [prepare] a paper nomination as soon as practicable, even if you do [put in place] an electronic one,” he said.

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