The provision of BDBNs is becoming increasingly problematic and potentially putting clients’ estate planning strategies at risk, DBA Lawyers director Daniel Butler told SMSF Adviser.
“We think the practice out there is very low grade,” Mr Butler said. “You have to have quality documents and you need to know what you’re doing. But most people are sacrificing other clients’ affairs with low-grade quality documents that are very sloppy. Lawyers are going to have a picnic.”
“People are going mechanical and want to have everything automated and want cheap,” he added. “So my theory is that most people out there, the general populous, generally don’t have a BDBN.”
Mr Butler said base-level errors are surfacing on masse, including that a lot of trustees have BDBNs which have technically expired.
Another significant issue, Mr Butler said, is that trustees are not paying appropriate attention to their document trail when creating a BDBN.
“If you want to do a BDBN, you should do a thorough deed document trail review,” Mr Butler said. “With funds that have been going for a while, there may be half a dozen documents to look at to make sure the whole chain of documentation does stack up to scrutiny.”
Similarly, Holley Nethercote partner David Court agreed that BDBNs are increasingly causing “a lot of issues” for SMSF trustees.
“There have been a lot of disputes that have gone to court. And the fact they’ve gone to court shows that in effect there’s uncertainty, and the fact there’s uncertainty means it wasn’t done properly in the first place,” Mr Court told SMSF Adviser.
Mr Court believes BDBNs are becoming an increasing area of concern for various reasons, including because of the increase in the size of SMSF balances as the superannuation system matures.
“There are big benefits that are frankly worth fighting in court over. Whereas previously, perhaps $20,000 or $30,000 just wasn’t worth arguing about,” he said.
For more on this topic, see Daniel Butler’s column, ‘Think you have a valid BDBN? Think again’
Of the recent cases SFSA Adviser has reporter, it appears to me that the litigation was commenced out of greed, not out of uncertainty. And technicalities are used by lawyers to get their clients what they want. As an example – the case where the BDBN referred to “the trustee of my estate” instead of “legal personal representative” as prescribed in the deed. Perfectly clear intentions thwarted by a technicality.
With the continual changes in the legislation, there needs to be regular update of SMSF Deeds. Therefore, all binding nominations have to be checked as against each amendment. We are creatures of the government’s never ending quest to chase it tail.