Is a Binding Nomination a “Testamentary Act” (and why do we care)?

Most of us are familiar with the concept of a Will being a testamentary act (a revocable disposition of property intended to take effect at death).  On the face of it, a superannuation binding nomination also appears to be a document that disposes of property upon a person’s death.

Many Wills include the provision “I revoke all previous testamentary acts”.  If a binding nomination was considered to be a testamentary act, then a later Will expressed to revoke all previous testamentary acts would seem to revoke that binding nomination. 

However, recent cases considered by Australian Courts are determining that binding nominations are not testamentary documents and also that in some circumstances administrators and attorneys can make or revoke a binding nomination on behalf of a person. 

The impact of these cases will have ramifications for a person’s estate planning in relation to:

  1. whether someone else may be able to make or revoke a binding nomination in respect of their superannuation entitlements;
  2. the importance of appointing an enduring power of attorney for financial matters;
  3. who they choose to act as their financial attorney;
  4. whether or not the power of attorney document should expressly permit or prohibit the making or revocation of a binding nomination.

Recent cases

There are statutory prohibitions on someone holding a power of attorney exercising particular powers such as making a Will (for example, section 26, Powers of Attorney Act 2014 (Vic)).  If a binding nomination was considered to be a testamentary document like a Will, then it might be inferred that there are similar limitations on who can sign a binding nomination on behalf of a person.

In the recent case Re SB; Ex parte AC [2020] QSC 139, the Supreme Court of Queensland declared that the administrator of the represented person, could execute a binding nomination in relation to the represented person’s superannuation entitlements in the Perpetual Super Wrap Trust.

In considering the question of whether or not an administrator can sign a binding nomination, the Court noted that section 33(2) of the Guardianship and Administration Act 2000 (Qld) provided that unless the tribunal orders otherwise, an administrator is authorised to do “anything in relation to a financial matter” that the adult could have done if the adult had capacity …”.  However, they noted that attending to financial matters did not extend an administrator or attorney’s authority to the making of a Will, which includes “a revocable disposition of property intended to take effect at death”.

In deciding that a binding nomination is a financial matter and not a revocable disposition of property intended to take effect at death, the Court said that the “nomination does not dispose of property but, by the exercise of a contractual right, directs the trustee how the death benefit should be dealt with”.  In support of these conclusions, the Court relied on previous cases such as:

  • The Queensland case in Narumon Pty Ltd [2019] 2 Qd R 247, where it was held that a binding nomination is not a testamentary act, and so is not captured by the restriction against delegating to an attorney the making of a Will;
  • The New South Wales case in McFadden v Public Trustee in Victoria {1981] 1 NSWLR 15, where the Court considered that the making of a binding nomination was a contractual right and not a testamentary power.

How we can help

Whilst this decision seems to clarify the position in Queensland, and provide guidance across all States, we note that it is not binding outside of Queensland.  In particular, the consideration of what constitutes a “financial matter” relied heavily on the definition in the Queensland Guardianship Act which is not included in powers of attorney acts in other jurisdictions.

What these cases also highlight is that powers in the superannuation fund deed and any express power or prohibition in the documents appointing the administrator or attorney will also be determinative in whether or not there is a power to make a binding nomination on behalf of a person.  Superannuation fund deeds should be reviewed to ascertain who is authorised to make a binding nomination and careful consideration should be given as to whether an attorney should be given the power to make or revoke a binding nomination or expressly prohibited from doing so.

For more information or guidance about estate planning, including superannuation death benefits, please do not hesitate to contact us.