Administration, BDBNs, Death benefits, Documentation

Case shows need for BDBN paper trail

SMSF BDBN Capacity Death benefit NSW Supreme court

The NSW Supreme Court has deemed a BDBN made on the day of an SMSF member's death valid, despite a challenge on the capacity of the deceased to execute the document.

A recent case heard in the New South Wales Supreme Court has shed light on the complexities surrounding binding death benefit nominations (BDBN) where disputes arise over the ability of a fund member to exercise capacity to execute the document.

The case of van Camp v Bellahealth Pty Ltd [2024] involved a situation where a sole member of an SMSF, who was also the sole director of the fund’s trustee Bellahealth, signed a BDBN in hospital on the day of his death, with the member’s de facto partner nominated as the recipient of the death benefit.

After the member passed away, the fund trustee failed to distribute the member’s benefit, valued at $4.7 million, to the designated recipient.

The plaintiff, the de facto partner of the deceased, subsequently sought a declaration that the BDBN was valid and binding, as well as an order that the benefits be paid to her.

The defendants, the SMSF trustee and two of the deceased’s executors, contended the BDBN was not executed in accordance with the Superannuation Industry (Supervision) (SIS) Act and the deceased lacked capacity to execute the BDBN. The defendants also alleged unconscionable conduct on the part of the plaintiff in procuring the BDBN.

When assessing this case and its outcomes, Sladen Legal senior associate Terence Wong pointed out testimony provided by experts proved crucial on the matter of the deceased to exercise capacity.

“His de facto claimed to not be aware that she was the beneficiary of the BDBN when she obtained the BDBN by email, printed it and asked the deceased to sign,” Wong said.

“Lengthy evidence on capacity (from the two doctors who also signed as BDBN witnesses) found that the sole member could still understand and discuss the nature of the BDBN he was signing, given he had signed his final will a couple of days beforehand.”

He added Hill v Zuda was referenced to counter a challenge asserting the invalidity of the BDBN on the grounds of non-compliance with regulation 6.17A(3) of the SIS Act, which requires the SMSF trustee to provide sufficient information for the member to comprehend the BDBN.

“A covering email explaining the BDBN was not printed by his de facto – only the BDBN was printed and brought to the sole member to sign,” he said.

“However, there was no clause mentioned from the SMSF trust deed expressly requiring that the requirements of regulation 6.17A applied to the BDBN, and it therefore did not apply.”

In handing down judgment, Justice Henry declared the BDBN was valid and binding and made an order for the fund trustee to pay the member benefit from the SMSF as intended by the deceased.

“Judge Henry accepted the de facto’s evidence and found no unconscionable dealing by her. The outcome could have been different if his de facto was involved with the instruction to his lawyer to prepare the BDBN,” Wong said.

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