An industry lawyer has warned practitioners should approach the task of being issued with an enduring power of attorney for a client’s SMSF with caution as the role may not provide any reward for the individual concerned.
According to DBA Lawyers special counsel Bryce Figot, this was the main takeaway from the recent McCabe v The Baltins Superannuation Fund case in the New South Wales Supreme Court.
In that case, the sole member of the fund, who was also the sole director of the corporate trustee for the SMSF, passed away leaving no spouse, no children and no binding death benefit nomination. The corporate trustee had also been deregistered.
Due to the circumstances, the court granted letters of administration to a lawyer, Terence McCabe, with the will annexed, resulting effectively in the $1.2 million of assets of the SMSF being donated to the Victor Chang Cardiac Research Institute.
A lengthy process was then undertaken to examine the deed of the fund to determine who the trustees of the fund should be subsequent to the death of the sole member.
Eventually the court ordered McCabe and Janina Jancu, who was the chief operating officer of the Victor Chang Cardiac Research Institute, to become trustees of the fund.
Speaking to delegates at this week’s Chartered Accountants Australia and New Zealand National SMSF Conference 2018 in Melbourne, Figot noted the arduous nature of the process reinforced one main point for practitioners.
“The problem here is that the practitioner can’t get paid for his time. If you ever put your hand up to be the holder of an enduring power of attorney, and let’s face it we all end up forming a trusted relationship with our clients, and if you volunteer to be the executor of the client’s estate and there is an SMSF involved, it might be a lot of work to wind it up upon someone’s death or even loss of capacity if you run it,” he said.
“Can you get paid? Certainly not from the fund. There are very limited circumstances where you can.
“What if the will said you can get paid for being an executor and you can get paid double because you’re also working for the fund? Is that allowed? No.
“So my point is what this really fleshes out is, number one, don’t be the holder of an enduring power of attorney [for an SMSF] or the executor of a client’s will, or if you’re doing it, just realise it will be a heck of a lot of work for no money.”