Aug 31, 2020 | Superannuation advice

Why every SMSF trustee should have an Enduring Power of Attorney

If you’re an SMSF Trustee, there are several vital things to consider when it comes to your estate and succession planning.

Your Will is important to enable assets to be distributed in accordance with your wishes when you die.

A binding Death Benefit nomination will direct your super and any insurance benefits to your chosen beneficiary.

However, many people are not prepared for what happens if a Trustee is incapacitated and not able to act either on a temporary or permanent basis.

Covid-19 and the events of 2020 are an indication of why now, more than ever, SMSF Trustees need to be prepared for the ‘unexpected’ by having an Enduring Power of Attorney in place.

An Enduring Power of Attorney is a legal agreement that enables an individual to appoint another person or people to make financial, personal/medical or property decisions on their behalf in the event that the individual is unable to act. This appointment can be either on a temporary or permanent basis depending on the reason for the appointment.

Many people believe that if they have a Power of Attorney in place their SMSF is secure. However, what happens in the event mental capacity is lost? Unfortunately, in this circumstance the Power of Attorney ceases to operate which is why it is important to have an EPOA in place and we’ll explain why.

All members of an SMSF must be trustees, but to be a trustee of an SMSF an individual cannot be under any legal disability including mental incapacity. If a trustee becomes unable to act or losses capacity they must be removed, and someone will need to be appointed either temporarily or permanently in the trustee’s place until the individual can act again on their own.

A person acting as an Enduring Power of Attorney will take on all responsibilities of being a trustee. They will make financial decisions on the members behalf. This will include the acquisition and disposal of investments, transacting on the funds bank account and paying all expenses of the fund including pensions. They will also be responsible for the signing of financial statements, annual returns, and other mandatory compliance minutes required. In other words, they will oversee the day to day running of the SMSF in much the same way the member themselves did.

As blended families are becoming more prevalent having an EPOA can avoid any unnecessary friction or certain actions being taken that you don’t anticipate.

Anyone can be appointed as an EPOA and you can choose to nominate more than one EPOA who will then act jointly in making the decisions. It’s also a good idea to appoint a substitute where possible should one of the EPOA’s not be able to take on the responsibility of being a trustee.

If something happens and you don’t have an EPOA in place there can be dire consequences. For example, if a member resides in NSW an application would need to be made by the next of kin to the NSW Civil and Administrative Tribunal to obtain an order to enable the SMSF assets to be dealt with.

If you have an SMSF, don’t leave your assets to chance and arrange not just a Power of Attorney, but an Enduring Power of Attorney sooner rather than later.

Written by Olivia Long – Managing Director, SMSF

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

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