The recent decision of Justice Applegarth (Queensland Supreme Court) in Re Rentis Pty Ltd [2023] QSC 252 examines an attorney’s powers to make a binding death benefit nomination (BDBN) for an incapacitated member of an SMSF.
Justice Applegarth said that “renewing” a BDBN extended to nominating different beneficiaries where the original beneficiary of the BDBN had died.
In Rentis:-
- Robert was a member of an SMSF.
- He lost capacity in December 2020; Robert had appointed his wife and brother Peter as attorneys under an EPA (which gave Peter an express power to ‘renew’ a BDBN).
- Prior to losing capacity, Robert made a BDBN directing the trustee to pay his death benefits as follows:
- 50% to his wife; and
- 25% to each of his children.
- Robert’s wife died in February 2021.
- Robert’s brother Peter remained as the sole attorney under the EPA.
- Peter, in his capacity as attorney for Robert, made a BDBN directing the trustee to pay Robert’s death benefits as follows:
- 25% to each of his children; and
- 50% to Robert’s estate.
The EPA provided, “I authorise my attorney/s to ‘renew’ any binding death benefit nomination made by me for any superannuation benefits or entitlement.” Justice Applegarth considered the meaning of the term ‘renew’ and whether it should be construed narrowly or given a purposive interpretation.
It was contended that the term ‘renew’ would only permit an attorney to make another BDBN that repeats the terms of the previous BDBN made by the principal.
Justice Applegarth did not favour this narrow interpretation and said, “A narrow construction would produce capricious, unreasonable, and certainly inconvenient results for a principal who became incapacitated and whose circumstances had changed or where other circumstances had changed. One would think that it is precisely the existence of changed circumstances that gave rise to the authority given to the attorney to renew any binding death benefit in the sense of making a fresh BDBN, that is, to make a new BDBN to address those circumstances or to renew the BDBN.”
He held that the term ‘renew’ did allow the attorney to make a BDBN that differed from the earlier BDBN made by the member.
Rentis provides useful guidance on how courts may determine the meaning of the power to ‘renew a BDBN’ if these words appear in an EPA. Of course, if the EPA spelt it out clearly to say different beneficiaries could be nominated, proceedings may have been avoided.
With dementia cases on the rise, the terms of EPAs, BDBNs, Reversionary Pensions, SMSF Trust Deeds and Wills should be regularly reviewed holistically (and not in isolation) so that court proceedings can be avoided.