A legal specialist has suggested putting an enduring power of attorney (EPOA) in place when establishing an SMSF is just as important as the presence of the trust deed in order to cover off potential client disabilities that may arise in the future and mitigate practitioner risk.
“The structure of SMSFs today requires two documents [at a] minimum – the trust deed and the enduring power of attorney,” consultant lawyer Peter Bobbin told attendees at The Tax Institute National Superannuation Conference held in Sydney last week.
“If you set up an SMSF, but you do not direct, encourage, coerce and push people into having an enduring power of attorney at the same time, you are negligent.
“Some of you might think I’m a bit of a harbinger of doom, but I would remind you when a court comes out with a declaration regarding negligence, it is predicting the past. [That’s because] the incident [will have] occurred three, four or five years ago. Then it made its way through the claim issues, the proofs and the court system, and then a judgment comes out.
“So when a court comes out with a judgment in a new area of negligence, it’s predicting the past.
“What I’m doing today is trying to tell you where we are today for when this will be predicted in the future.”
Once an EPOA has been put in place for the SMSF trustees, Bobbin recommended a timeframe they should follow for the review of these documents.
“I actually urge people to update [these] every three to five years, even if all you do [ends up having the trustees] sign exactly the same [document],” he said.
To reinforce this suggestion, he challenged practitioners to attempt to understand how the court or regulator would view these documents in the coming years.
“If a court is dealing with an enduring power of attorney that is 25 years old or is looking at an enduring power of attorney that is three years old, which one do you think the court will feel more confident with?” he asked.
“Which one do you think institutions would be more comfortable with? This is just common sense.”
