A superannuation lawyer has emphasised the importance for limits to be placed on any enduring power of attorney established to cover the possibility of an SMSF trustee suffering mental incapacity, particularly with regard to estate planning matters.
Cooper Grace Ward partner Scott Hay-Bartlem said to ensure proper boundaries are established, practitioners and their clients have to examine the SMSF trust deed, as well as the terms specified in the power of attorney itself.
“There are some SMSF trust deeds out there that say an attorney can change, revoke, kill, jump on, burn your binding death benefit nomination and do whatever they want, unless your power of attorney restricts it,” Hay-Bartlem told attendees of the SMSF Association Technical Summit 2024 in Sydney recently.
“Do you want your attorney to be able to do anything to your binding death benefit nomination? I don’t. So what does your power of attorney say?”
He pointed out the power of attorney must also address any potential conflicts of interest that may exist.
“If you’re making a binding death benefit nomination, chances are your attorney somehow has an interest. So [you need to determine if] your attorney has a conflict in amending or even affirming your existing binding death benefit nomination,” he said.
“Do you have a conflict clause in your power of attorney [saying the person] can do anything they want despite the conflict? That’s too wide.
“You don’t want your attorney … being able to do anything they want if it gives them an advantage over you.”
According to Hay-Bartlem, the key is for advisers and their clients to know all of the actions available to the attorney.
“[You need to know] what does your SMSF deed say, what does your enduring power of attorney say and make sure you’re happy with the limits in there because some limits are probably good,” he noted.
