Can your enduring power of attorney (EPOA) sign your super fund death benefits away?

A recent decision by the Queensland Supreme Court has raised some interesting issues regarding the powers of an enduring attorney to make, vary or revoke a binding death benefit nomination (BDBN) on behalf of a superannuation member.

In the case (Re Narumon Pty Ltd [2018] QSC 185), the enduring attorneys of a member who no longer had mental capacity purported to extend his lapsed BDBN by signing an “extension of death benefit binding nomination form”, which the court upheld as valid.

Reasons for the decision included that the trust deed expressly allowed a validly-appointed enduring attorney to exercise any power given to a member in the deed if the member were under a legal disability, the deed permitted a member to make a BDBN, the enduring power of attorney (EPOA) did not place limits on the attorney’s authority and, importantly, the purpose of the extension was simply to confirm the member’s clear wishes.

So what does the decision mean for you as a member of an SMSF?

First, consider whether granting your attorney these significant powers is something you are comfortable with. Some people like the flexibility this arrangement provides (if changes in their personal circumstances after loss of capacity warrant a change to their BDBN, the attorney is able to step in) while others are concerned with the potential risk of abuse by the attorney.

If you think it is a good idea, your next step is to have a look at your EPOA (or sign one).

Boxes to tick

The scope must be wide enough to include the signing of a BDBN – at the very least it needs to empower your attorney to deal with your financial affairs – and must not include an express limit on the attorney’s power in respect of BDBNs. Depending on your circumstances and the jurisdiction of the EPOA, the document may need to expressly allow an attorney to enter into conflict transactions (especially if the attorney is to be a beneficiary of the death benefit under the nomination). Even if  this is not a statutory requirement, it may be prudent to include such a statement.

Next, check your trust deed. Does it allow you to implement the strategy? If not, have it amended. Ideally it should confer an express power on the attorney to make, vary or revoke a BDBN on behalf of a member. Short of the deed saying this, it should permit members to delegate to their attorney. While you are  looking at your trust deed, see if it includes a timeframe after which your BDBN lapses (generally three years) as once a nomination has lapsed, it no longer binds the trustee and your death benefit would be allocated as per the trustee’s discretion (including to themselves if eligible). This may be another reason to update your deed.

Your EPOA and your trust deed must work together to achieve the intended result, so focus on both. Given superannuation may one day make up the bulk of your wealth, think very carefully about who it is you choose as your attorney/s and entrust with those broad powers. Making the wrong choice may cause your intended beneficiaries to miss out.

Consider making your wishes known – via death benefit nominations (including binding and non-binding ones) or other methods. This may, however, be a double-edged sword, as while this could help a court uphold a BDBN made by your attorney to carry out your wishes as valid, it may also serve as ammunition for a disgruntled party trying to invalidate the latest BDBN where the terms differ (justifiably or not) from your previously stated wishes. Whether a BDBN made by an attorney is valid will be determined on a case-by-case basis.

If you want to limit your attorney’s authority, then you need to sign a new EPOA containing the necessary limitations and/or vary your trust deed accordingly.

This article was written by Julie Hartley who is an associate with Townsend Business & Corporate Lawyers.

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