We have long advised that you should appoint an attorney to make decisions for you if you lose capacity. Usually that means making decisions about day to day living and medical treatment as well as managing your financial affairs.
A recent case has taken that a step further than most people perhaps realise, by confirming that your attorney may make decisions that affect where your super is paid when you die.
When you die, the trustee of your superfund must pay out the balance of your super (death benefit).
The trustee can decide to pay your death benefit to your estate, your spouse, your children or your dependants, unless you make a binding death benefit nomination (BDBN). The trustee must pay your death benefit in the way set out in the BDBN.
A lot of BDBNs for superfunds, particularly non self-managed funds, lapse after 3 years, at which time you need to make a new BDBN. You can make, change or cancel a BDBN while ever you have capacity. What if you lose capacity? Can your attorney make a BDBN on your behalf?
The Supreme Court of Queensland has recently decided that an attorney has the power to make, renew or extend a BDBN on behalf of a superannuation fund member.
This decision has a significant impact on estate planning and you need to carefully consider whether you want your attorney to be able to make a BDBN on your behalf. If not, you may need to change your enduring power of attorney (EPOA).
In some situations, you would not want your attorney to have this power as it may upset your estate plan and could potentially allow your attorney to pay your super to themselves or their preferred beneficiary, instead of your intended beneficiaries.
Alternatively, you may want your attorney to have this power so they have the flexibility to manage your super if your BDBN lapses or the circumstances of your nominated beneficiary change, exposing your death benefit to extra tax or the beneficiary’s creditors or ex-spouse.
The recent case highlights the need to get proper advice before making, or cancelling, a BDBN, so that you can be sure your super is paid to your intended beneficiary.
To get this right your BDBN, the trust deed for your superfund and your EPOA must all be reviewed and potentially amended.
Superannuation Fund Deed
Your superfund deed may currently either expressly allow or prevent your attorney from making a BDBN, or it may be silent on the matter.
Your estate planning lawyer can vary your superfund deed to either:
- stop your attorney from making, renewing or extending a BDBN on your behalf; or
- specifically allow your attorney to make, renew or extend your BDBN.
In our experience, you should always talk to our estate planning lawyer before making any variation to your superannuation fund deed, so that any estate planning work previously put in place is not inadvertently undone.
Binding death benefit nominations
The BDBN form for self-managed superannuation funds are governed by the superannuation fund deed alone, not superannuation legislation.
The BDBN must comply strictly with the provisions of the superannuation fund deed and any minor discrepancy between the deed and the BDBN may make the nomination invalid. Therefore, it is essential for your estate planning lawyer to read the superannuation fund deed before preparing your BDBN.
Enduring power of attorney document
To make sure your super is paid to the right person, we recommend your EPOA expressly provide whether your attorneys have the power to make, renew or revoke a BDBN on your behalf.
Please be in touch with one of our estate planning lawyers if you want to discuss your attorney’s powers or if we can assist you in preparing the documentation to give effect to your wishes.