Enduring Powers of Attorney and Superannuation – the importance of express authority
Clients often ask - can my attorney(s) deal with my Binding Death Benefit Nomination (“BDBN”) in NSW?
The answer is – it depends.
Re Narumon Pty Ltd – a recent Queensland case
There has been case law in Queensland dealing with this issue.
The decision of Re Narumon Pty Ltd [2018] QSC 185, sheds light on why this a grey area in the law, as well as potential pitfalls to be aware of when considering the complex interaction of Enduring Powers of Attorney and Binding Death Benefit Nominations.
The facts in this case in brief were:
Mr John Giles (“John”) was a member of the John Giles Superannuation Fund (“SMSF”).
Narumon Pty Ltd was the trustee of the SMSF.
John had signed a BDBN on 5 June 2013 nominating that 47.5% of his death benefits be paid to his second wife Mrs Narumon Giles (“Mrs Giles”), 47.5% be paid to his son Nicholas (from his second marriage) and 5% to his sister Mrs Keenan and such notice had a 3 year expiry period.
John did not include any of the children from his first marriage in his BDBN.
John also had a separate reversionary pension that on his death reverted to his wife Mrs Giles.
John had also appointed his wife Mrs Giles and his sister Mrs Keenan as his attorneys. They were also both members of the SMSF.
John ultimately lost capacity.
On 16 March 2016 – his wife and his sisters, as his attorneys on behalf of John purported to both:
Extend his existing BDBN for a further 3 years – which if this nomination was valid, would have left John’s super death benefits 47.5% to Mrs Giles, 47.5% to Nicholas and 5% to Mrs Keenan (“the extension BDBN”); and
Sign a new BDBN leaving John’s super death benefits 50% to Mrs Giles and 50% to Nicholas (“the new BDBN”).
When considering the above facts, it is relevant to note that:
If there was no valid BDBN, then the SMSF trustee would need to consider all of John’s dependants (ie Mrs Giles and his children from his first marriage, as well as his son Nicholas from his second marriage) – as potential objects when determining how to distribute John’s death benefits; and
Mrs Keenan was not an eligible person to be nominated by John as a beneficiary in a BDBN (as she was not a dependant for the purposes of Regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (Cth) and that requirement had been imported into the SMSF trust deed).
Although the case does not make it clear, it is tempting to think that the new BDBN might have been signed by the Attorneys to try to correct the problems that John had created, when in 2013 he named his sister as a 5% beneficiary of his super, despite her not being eligible to receive it via a BDBN.
In any case, the Court was asked to determine whether an Attorney appointed pursuant to an Enduring Power of Attorney in Queensland had the power to “make, renew or extend” a BDBN on behalf of a Principal.
The Court also had to consider issues of conflict.
The Court held that in this particular case, the Attorneys could make and could renew BDBN’s as:
The court considered such acts were within the scope of being a “financial matter” under the Powers of Attorney Act 1998 (Qld) ; and
The relevant Superannuation Deed did not contain any restriction against the Principal delegating the exercise of this power (to make, extend or renew a BDBN) to the attorneys.
However, the Court also held that the Attorney’s obligations not to act in their own personal interest, meant that the new BDBN was not a valid exercise of power by the attorneys.
The reason why the new BDBN was not valid, was because it was a conflict of interest for Mrs Giles to increase the share she would receive from John’s super.
Ultimately it was held that:
In respect of the reversionary pension Mrs Giles was entitled to receive all of the same.
For all other super assets of John - the extension BDBN was held to be a valid and binding nomination and therefore the remainder of John’s super was to be distributed as to 47.5% to Mrs Giles, 47.5% to Nicholas, but the 5% nomination to Mrs Keenan failed, as she was not a dependant.
Accordingly the remaining 5% was ordered to be distributed by the Trustee in accordance with the SMSF trust deed.
Best Practice in NSW – be express!
Unfortunately the situation in New South Wales is even less clear than in Queensland!
In NSW there is no definition in the Powers of Attorneys Act 2003 (NSW) as to what is considered a “financial matter” nor is there any provision expressly confirming that an Attorney is able to make, extend or renew a Binding Death Benefit Nomination on behalf of a Principal.
Therefore, in light of the findings of Re Narumon Pty Ltd and the inherent limitations of the Powers of Attorneys Act 2003 (NSW), if you want your attorney to be able to extend, renew, revoke or make any BDBN’s to bind your super trustee, then it is necessary to:
Review the terms of the Superannuation trust deed to ensure there are no clauses which restrict the exercise of this power by a Principal’s attorney(s); and
Include an express provision in the Enduring Power of Attorney document specifying that the Attorney(s) may make, extend or renew a BDBN on behalf of the Principal.
If you require any advice as to whether the terms of your current Enduring Powers of Attorney or Superannuation Trust Deed permits your attorneys to make, extend or renew your BDBN or not, please contact us here at Peacockes Solicitors on (02) 6882 3133.