Speaking in a recent webinar, Cooper Grace Ward Lawyers partner Hayley Mitchell said while there isn’t any case law examining capacity in relation to making a binding death benefit nomination (BDBN) this will likely become a bigger issue for estate planning disputes in the future.
“Given the prevalence of estate disputes, an ageing population and the increase in incapacity that we are seeing with some of our clients, it think it’s something we are going to see more of,” Ms Mitchel warned.
She referred to the recent decision, Walter William Nespolon v Lindy van Camp [2022] NSWSC 1190 where a trustee had sought advice about their ability to defend a claim relating to the validity of the BDBN.
While the main proceedings for this dispute have not been heard yet, Ms Mitchel said that the BDBNs will likely be disputed in the main proceedings on the basis of a lack of capacity.
Ms Mitchell noted that the BDBN was prepared two days before death and that the solicitor who prepared the BDBN had noted concerns about the deceased’s capacity in her file notes.
Advisers she warned need to be aware that a BDBN could be attacked based on factors like lack of capacity.
“We need to ensure that we get that right during the estate planning phase,” she said.
While Ms Mitchel said there isn’t a judgement on this specific issue, its highly likely that the courts are going to say that the requisite capacity to make a BDBN will be similar to that of a will.
“So if we’ve got a client that we’ve just emailed a binding nomination to and we haven’t we haven’t visited or spoken to the client personally about the nomination and the ramifications to really test or provide evidence of their capacity then I think we’ve got real risks of those nominations potentially being reversed,” she cautioned.
