Central to the important responsibilities bestowed on a trusted person when you create an enduring power of attorney is the making of personal and financial decisions that have the same legal effect as if you’d made those decisions yourself.
There had been some uncertainty, however, about whether an attorney’s power included making, renewing or extending a Binding Death Benefit Nomination (BDBN) – the form a superannuation fund member signs in order to determine who receives their super proceeds on their death.
Superannuation is not included in a person’s will, meaning a binding direction such as a BDBN is crucial in directing the superannuation trustee as to how to distribute the deceased member’s funds. For this reason, it’s generally advisable for BDBNs to be prepared in conjunction with a person’s will and estate plans.
But what is the position on changing the details of the nomination should the member lose the capacity to do so before they die?
The case of Narumon Pty Ltd
The 2018 Supreme Court of Queensland case Re Narumon Pty Ltd [2018] QSC 185 clarified the position of an attorney in making, renewing or extending a BDBN on behalf of a member.
In this case, the Supreme Court of Queensland confirmed that an attorney has the power to make, renew or extend a BDBN on behalf of a member.
Mr Giles was a member of the John Giles Superannuation Fund. He made five BDBNs between 2010 and 2013. His last BDBN was made in June 2013 and was a lapsing nomination, meaning it expired after three years in June 2016. Shortly after making this BDBN, Mr Giles was assessed by a geriatric psychiatrist as being “totally incapable of making financial, health and lifestyle decisions”. In November 2013 his spouse Narumon and sister Rosyln, both appointed as Mr Giles’ power of attorney in January 2013, began acting in that capacity.
In March 2016 Narumon and Roslyn signed a document to extend the June 2013 nomination for a further three-year period. The June 2013 BDBN provided for 5% of Mr Giles’ benefit to be paid to his sister and the remainder divided equally between his spouse and minor child, Nicholas (47.5% each).
But Mr Giles’ attorneys also signed a new BDBN which excluded Roslyn and split the benefit equally between Narumon and Nicholas. This was done as protection in case the June 2013 nomination was considered invalid, recognising the fact that Mr Giles’ sister was not a dependant within the meaning of that term as it appeared in the Fund deed or s 10 of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘the Act’), and therefore was not eligible to receive any part of the death benefits.
The trustee of the fund, Narumon, sought declaratory relief from the court on the various issues raised by these actions.
What the court decided
The Court confirmed that there does not appear to be any restriction in the Act which would prevent an attorney acting under an enduring power of attorney from executing a BDBN on behalf of a member, and nothing in the deed itself which would prevent an attorney signing a nomination for a member. Whether an attorney could execute a nomination depended, therefore, on the relevant Power of Attorney Act.
On this issue, the court held that the making of a BDBN was a financial matter and was not a matter which must be performed personally (i.e. it was not a testamentary act, such as the restriction on an attorney making a will). Therefore the action could be delegated to an attorney.
For these reasons the extension of Mr Giles’ June 2013 BDBN was valid. The attorneys merely confirmed the nomination made by Mr Giles himself, but because his sister Roslyn was not his dependant, under the terms of the Act, she was ineligible to receive her nominated 5% benefit. Her inclusion in the BDBN did not, however, render the entire nomination invalid.
The making of the new BDBN in March 2016, the court said, would only be valid if the transaction was not a conflict transaction – where one of the attorneys or the relatives benefits from the transaction – which was not authorised under the terms of Mr Giles enduring power of attorney document. The court found the new BDBN was a conflict transaction because of the change made – excluding Roslyn from the benefit – and was therefore invalid.
What are the implications of the decision in Narumon?
The Supreme Court’s decision provided certainty on the power of an attorney to deal with a BDBN on behalf of the fund member.
It also reinforced the importance of a person making an enduring power of attorney to address the issue of an attorney’s power to make, renew or change a BDBN within the document, as well as provide clear direction on whether an attorney can enter into a conflict transaction. The fact many people empower close family members with the power of attorney, but also make them beneficiaries of their superannuation benefit, make this a highly pertinent issue in estate planning.
If any of the issues raised in this article apply to your situation, or you would like further clarification on them, contact Law By Dan today Book a free, initial consultation with one of our Will & Estate lawyers across Australia.
