Trustees should consider granting an enduring power of attorney (EPOA) to someone they trust in order to avoid compliance issues if they lose the capacity to make decisions about their super in the future, according to an SMSF expert.
SuperConcepts SMSF technical and private wealth executive manager Graeme Colley said trustees could save themselves a lot of trouble if they granted an EPOA to someone they trusted, sooner rather than later.
In a blog post on the AMP Capital website, Colley said trustees who did not grant an EPOA were at risk of obstructing the continued operation of their SMSF in the event of them becoming legally unable to make decisions about their super.
“If you don’t have an EPOA and have lost the capacity to make decisions, you won’t be able to appoint a legal personal representative to act in your place as you do not have the capacity to do so,” he noted.
He added a family member or other concerned person could still apply to the relevant tribunal to be made an administrator and guardian if no EPOA was in place and then be appointed as a legal personal representative, but highlighted the disadvantages of that scenario.
“This process can be costly, drawn out and probably will exceed the six-month time frame to meet the definition of an SMSF,” he said.
“It is possible that the guardian who is appointed as your legal personal representative may not be the original applicant to the tribunal. The job of the tribunal is to appoint the most appropriate person in their view to act on your behalf.”
He also pointed to the consequences the fund would face if it failed to meet the SMSF definition as a result of a legal personal representative not being appointed within the required six-month period.
“Failure to remain complying puts the fund at risk of becoming a non-complying fund and having assets and income taxed at a penalty rate,” he said.
In a recent court case it was found that trustee appointments under an EPOA were binding and could not be removed by another trustee unless formal documentation existed to allow for that to happen.
