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Corporate trustee key for loss of capacity

Establishing a corporate trustee SMSF may be optimal in avoiding complexities in cases of loss of capacity of trustees, according to a lawyer.

CBA Commonwealth Private Office strategic advice specialist Caroline Harley said it is vital for advisers to discuss the establishment of corporate trustees with clients who still have individual trustees to ensure succession and continuation of the fund.

Harley delivered the warning at the recent Tax Institute 2018 National Superannuation Conference in Melbourne during a session about loss of capacity, noting section 17A(3)(b) of the Superannuation Industry (Supervision) (SIS) Act allows a legal personal representative for a member to act as a trustee should the member lose mental capacity.

She said appointing the legal personal representative as a trustee has to be permitted under the trust deed, not just the SIS Act, and they have to be appointed in their own right and can no longer act as an agent.

“So they step in and they have all of the powers that a usual trustee would do. Obviously you’ve got the written consent and the appointment and all of the assets would need to be transferred into the name of that new trustee,” she said.

“This is particularly pertinent where you’ve got individual trustees and all of those individual names are on the title. I can say to you I have first-hand experience of complexity and the time it has taken in removing an individual and replacing that individual with another person and trying to figure out who is going to sign that transfer document because that person no longer has capacity.”

Considerable effort is also required to apply to the Duties Office to seek a concessional transfer and all the evidence required to demonstrate the member is eligible for the concessional stamp duty, followed by lodging with the Titles Office, she said.

“It’s not a simple process and it’s definitely a really good argument for using corporate trustees,” she noted.

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