Court hands down important decision on administrator powers

As a result of the accident, she was not able to manage her financial matters and one of her sons was appointed as an administrator for financial matters other than the damages settlement from the motor vehicle accident.

In this decision, Cooper Grace Ward Lawyers partner Clinton Jackson explained that the court considered whether the son, as administrator, had the power to make a binding death benefit nomination directing the trustee to pay the death benefit to the estate.

Approximately $6.75 million of the damages settlement was invested into the Perpetual Private Person Wrap Superannuation Fund for SB.

The trust deed for the fund provided that, on the death of the woman, the trustee had to pay a superannuation death benefit to the persons specified in a non-lapsing nomination (a binding death benefit nomination); or if there was no non-lapsing nomination, to one or more of the member’s dependants and legal personal representative as determined by the trustee using their discretion.

In an online article, Mr Jackson said the main question in this case was whether a binding death benefit nomination is a testamentary act or a financial matter — being an act pursuant to a contract between the trustee and the member.

“An administrator can do anything in relation to a financial matter, but they cannot make or revoke a will or undertake a testamentary act,” Mr Jackson noted.

“The court found that the execution of a binding nomination was a financial matter, and not a testamentary act, and the administrator was able to make a binding death benefit nomination in favour of the legal personal representative of [the woman].”

This case further reinforces the decision in Re Narumon [2019] 2 Qd R 247, where the court found that the member’s attorney appointed under an enduring power of attorney could make a binding death benefit nomination on behalf of a member who had lost capacity.

“This most recent case reinforces the importance of having a properly structured estate plan, including enduring powers of attorney and SMSF trust deeds that work together to ensure your attorneys only have the powers you intend them to have,” Mr Jackson said.

“Although the ability of the administrator in this case, and the attorney in Re Narumon, to make a binding death benefit nomination on behalf of the incapacitated member was important to achieving the desired outcome, this may not be appropriate in all circumstances.”

Mr Jackson stressed that there may be circumstances where it would be possible for an attorney or administrator to use these powers in a way that would defeat the intended outcome of a client’s estate plan.

It is therefore essential that existing estate plans, in particular enduring powers of attorney and SMSF trust deeds, are reviewed to ensure enduring power of attorney documents allow attorneys to renew, extend or make binding nominations on behalf of a member where appropriate.

However, Mr Jackson cautioned that it is also important that attorneys are not given inappropriately broad powers that potentially allow them to make a nomination that is inconsistent with the member’s estate planning wishes.

“Unfortunately, we are continuing to see many enduring powers of attorney and SMSF trust deeds that give attorneys almost unlimited power to change how a superannuation death benefit is paid. This can lead to significant issues for the advisers involved if this is not consistent with their client’s desired outcome,” he said.