Law firm flags ‘liability risk’ with BDBN references in statements
A law firm has warned SMSF professionals on the dangers of including references to beneficiaries in member statements and stressed the importance of good file notes.
Speaking in a recent webinar, DBA Lawyers special counsel Bryce Figot said where SMSF professionals are discussing succession planning such as setting up binding death benefit nominations, it's important they are careful not to engage in legal practice.
Engaging in legal practice, he explained, includes practising law or providing legal services.
Mr Figot explained that whether or not an SMSF professional is engaging in legal practice will depend on a range of factors.
“You’re probably not engaging in legal practice if you can prove that a lawyer not only drafted the master template but also tailored or populated the template and the client has a PDS or information memorandum drafted by a lawyer explaining what BDBNs are and different options.”
“[In addition], the client who is now informed due to the PDS and memo has directed you as a mere scribe to fill in the blanks.”
Another important aspect, however, is keeping file notes, Mr Figot stressed.
“If the file note states ‘that a lawyer drafted the master template, the client has a PDS drafted by a lawyer explaining BDBNs and how they work and the client has directed me to act as a mere scribe’ then that’s likely to leave you in a strong position,” he said.
While typically advisers only tend to keep file notes for seven years, they should ideally be kept indefinitely given that BDBNs can be non-lapsing for SMSFs, he stated.
“Ensure that you can prove what happened so that you’re able to refute any suggestion that you engaged in legal practice.”
Mr Figot also advised against including statements about nominated beneficiaries in the financial statements produced for clients.
“It is a very involved legal assignment to determine whether a BDBN is effective. At the very least, include a disclaimer,” he warned.
“I don’t think financial statements should be wading into that — imagine if one of your staff writes in the member statement that a BDBN is 100 per cent LPR and the BDBN turns out to be invalid for a particular reason.
“If you’re prepared these financial statements stating that they are, could you end up wearing some of the liability?”
If this is included in the member statement, Mr Figot said there should at a minimum be a disclaimer stating that it is not legal advice.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
