In this Judgment of the NSW Supreme Court, a binding death benefit nomination (BDBN) signed on the date of death of the sole member of a self managed superannuation fund (SMSF) was upheld. Challenges to the BDBN’s validity, by the SMSF trustee and two of the deceased’s executors, based on lack of capacity and unconscionability both failed.
The BDBN, by the sole member of the SMSF, was in favour of the sole member’s de facto partner. The sole member instructed his lawyer a couple of days beforehand to prepare the BDBN for his de facto’s benefit following advice on the taxation benefits of paying the $4.7 million death benefit solely to the de facto. If the BDBN was invalid, then the death benefits may have been paid to the estate and then to the trustee of a testamentary trust under the deceased’s will (being a trust for the benefit of the de facto and their two daughters).
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.
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.
The single Judge Henry J accepted the de facto’s evidence and found no unconscionable dealing by her. A key component of this being the intention of the parties to utilise taxation concessions for her benefit and for the benefit of their two daughters.
Hill v Zuda was mentioned in the Judgment to refute a claim that the BDBN was invalid for not complying with regulation 6.17A(3) of the Superannuation Industry (Supervision) Regulations 1994 (requiring the trustee of the SMSF to give reasonable information for the member to understand 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. 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.
The outcome could have been different if his de facto was involved with the instruction to his lawyer to prepare the BDBN.
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
Terence Wong
Senior Associate
T +61 3 9611 0112 l M +61 0458 846 022
E twong@sladen.com.au