Speaking at the SMSF Adviser Strategy Day in Sydney last week, Perpetual senior legal counsel Caroline Harley said cases such as Munro v Munro [2015], in which the binding death benefit nomination was held not to be binding, demonstrate the importance of checking the wording in BDBNs.
“I can’t say this enough: if you haven’t already done an inventory of all of your binding death benefit nominations, if it’s paying to the estate, go back and check the wording – this is going to be a litigation bomb,” she warned.
“The minute anyone finds out that ‘legal personal representative’ is not what’s written on there, that’s a means of contesting it.”
Ms Harley expects that the industry will see “incredible amounts” of these types of case going through the courts.
“We’re already seeing it with the Superannuation Complaints Tribunal – I’ve been told they’re only starting to look at cases from 2013 so this area being contested is absolutely out of control,” she said.
“Do everything you can to dot your Is and cross your Ts – and don’t use ‘executor’, use ‘legal personal representative’.”
Another important aspect of this case of which SMSF practitioners should be aware, Ms Harley said, is the fact that the presiding judge, Justice Mullins, made enquiries during the proceedings as to who was responsible for preparing the binding death benefit nomination.
Cases such as Hill v Van Erp, Ms Harley added, indicate that a practitioner could potentially be sued if a will or binding death benefit nomination is incorrectly drafted.
“[In this case] a will was drafted by a lawyer but it wasn’t signed correctly so the beneficiary missed out because it wasn’t executed properly,” she said.
The beneficiary, who missed out, was able to sue the lawyers because they did not draft the will correctly.
“I want you to think carefully about that with binding death benefit nominations, and your professional obligations and your professional indemnity insurance,” Ms Harley said.
“My strong recommendation is that you handball all of this liability nicely over to an estate planning lawyer who knows about superannuation and get the death benefit nomination prepared with the will, the enduring power of attorney and all of those other documents – shift the liability,” she said.
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Legal Personal Representative is a defined term in the SIS Act. Any derivation from the script can allow legal challenge
Hi just wondering if the BDBN says “legal representative” is this fine? Or needs to have “legal PERSONAL representative”. Thanks