29/10/2014

The ability of an enduring attorney to change a member's death benefit nomination causes much angst among financial advisers and clients, so what is the situation?

What happens when a Death Benefit Nomination (DBN) created by the member is changed by a later DBN that has been signed by the member's Enduring Power of Attorney (EPOA)?  What happens when that later DBN nominates the person who is signing the form on behalf of the member?  

This is important to consider for those super funds that only offer lapsing nominations because certainty for death benefit payments is lost if a DBN lapses.   

The Superannuation Complaints Tribunal was asked to consider a complaint which involved a Binding DBN which had been signed by an enduring attorney ("EPOA") nominating themself as a beneficiary.  

The member had signed a Will giving 37.5% of the estate to the daughter, 37.5% of the estate to the son and 25% to the member's sister.

The member lost capacity and the sister (using an EPOA) later completed a BDBN form directing that the super be paid to the same people and in the same percentages as the will had used.  The Trustee accepted this form signed by the EPOA.

Following the death of the member, the super fund decided to pay 35% to the daughter and 35% to the son (in accordance with the nomination) and 25% to the sister.  The payment to the sister was not to her personally but as the executor of the deceased member's estate.  So the payment was not for her benefit but to distribute according to the Will, thereby significantly reducing her 'share'. (Of course the sister was not an eligible death benefit beneficiary unless there was an interdependency relationship with her brother prior to his death).

If she received the money as executor of the estate, rather than in her own right, then that money would be divided up again as per the Will (37.5% daughter, 37.5% son, 25% sister) and she would end up with only a quarter of the amount she would have received had it been paid directly to her from the super fund.

The sister claimed to be eligible to receive the payment directly from super due to having an interdependency relationship with her brother, who had been an alcoholic.  She claimed to have relied on the advice of a financial planner in this regard.

The Trustee and Tribunal both disagreed on the existence of an interdependency relationship and said the sister could not receive from the super benefit unless it was as the executor of her brother's will.   

As the sister said that the nomination was not to her as an executor, the super fund claimed that the BDBN was not clear.  The trust deed said when this occurred benefits should be paid to the estate.

The Tribunal in this matter said that the EPOA document allowed the sister to complete and sign the BDBN, however, it would only have been valid if it nominated persons who were eligible to receive payments directly from the super fund.

It is important to understand how EPOA documentation should be prepared and used when dealing with superannuation.  Please contact Townsends Business & Corporate Lawyers on (02) 8296 6222 if you would like our assistance.