Binding Death Benefit Nomination War Stories: Sharing Capacity

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One of the few certainties of life is that the next Binding Death Benefit Nomination (BDBN) case is never far away.

So it is that 2024 already has its first BDBN judgment.

The Facts

The case of van Camp v Bellahealth Pty Ltd concerns a self-managed superannuation fund that had a single member who was also the sole director of the fund’s corporate trustee.

The member died young, and signed a new BDBN from hospital on the day he died. The BDBN reversed his earlier strategy (devised in consultation with his lawyer) to pay the superannuation to his estate to retire debt. Instead, the new BDBN paid the superannuation benefits directly to his de facto partner.

The death benefits were valued at $4.7 million.

The trustee refused to pay the death benefits as directed by the BDBN, arguing that the member lacked capacity at the time he made the nomination. It also alleged that the de facto partner acted unconscionably in that she procured the member to sign the new BDBN directing the benefits to herself.

The de facto partner sought a declaration that the BDBN was valid and an order to pay the benefits to her.

BDBNs and Capacity

A BDBN is a notice given by a member of a superannuation fund requiring the trustee to pay the member’s death benefits as directed in the notice. Absent a valid BDBN, the trustee has discretion as to how to pay the benefits.

A BDBN is therefore an essential component of a good estate plan.

At issue in this case was whether the member had capacity when he made the BDBN. As he was receiving palliative care at the time, there was a question as to whether his treatments had impaired his capacity.

Expert evidence was given, including by the doctors who witnessed the new BDBN.

Ultimately, the court held that the trustee could not establish that the member lacked capacity. The test it applied was whether the member had the capacity to understand the nature of the transaction at hand when it was explained to him. The court accepted that the member’s statement as he signed the BDBN that it would stop his partner “being taxed out of her brains” was evidence that he understood that the superannuation would go to her.

Ultimately, it appears that the member’s wishes were carried out, but it could so easily have turned out differently. Had his treatments been even more aggressive so that the member’s capacities were impaired to a greater extent, we might have seen a very different outcome.

Aintree Group Legal will be happy to discuss your estate planning with you further. Contact us today.