Advisers will have to play a more active role in managing the risks associated with the mental incapacity of SMSF trustees as the Australian population continues to age significantly, a specialist lawyer has said.
Australian Institute of Health and Welfare statistics from last year showed 15 per cent of Australia’s population was aged 65 or over in 2017, compared to 5 per cent in 1927. Further, the government agency has predicted 22 per cent of the population, or 8.8 million people, would fall into this demographic group by 2057.
View Legal director Matthew Burgess indicated this trend highlights how the mental incapacity of SMSF trustees will continue to gain more significance.
“It’s becoming one of the fastest-growing areas of the law. People have a lot of money tied up in SMSFs and now that they’re living longer, their mental health is often degenerating. Ten years ago, elder law and abuse didn’t really exist, but now the need to protect our ageing population has increased substantially,” Burgess said.
“Many individuals already have a gap in understanding SMSFs and need support from advisers and professionals. When you factor in mental incapacity, the issue becomes even more serious.”
With regard to the role advisers can play in managing this issue, he identified communication with clients so as to better educate them and ensuring all of the relevant SMSF documentation is up to date as the key elements.
In addition, he pointed out advisers had to use technology to fulfil this role more effectively.
“Documentation is critical, especially in the estate planning stage. But what’s interesting is the legal sector is behind in terms of adapting to how documentation is managed. Estate planning is essentially still without exception reliant on pen and paper. That’s how archaic that part of the industry is,” he noted.
“Not only should lawyers and finance professionals be leaning on technology to manage processes, they should also be sharing their knowledge with trustees where they can. In the past, advisers have been perceived as keeping information within their firms, but if the culture was to instead share knowledge and educate trustees, that could be of real benefit.”