Succession Planning

Create early access for EPOA


Introducing an enduring power of attorney into an SMSF early could minimise complications after the trustee loses mental capacity.

Trustees of an SMSF should consider allowing their appointed enduring power of attorney (EPOA) to become involved with the fund’s inner workings before losing mental capacity.

Heffron SMSF technical and education services director Leigh Mansell said research had found mild cognitive impairment usually began 10 years before a formal diagnosis of diminished capacity and an EPOA joining a fund early could work alongside the trustee or member they may act for one day.

“For some clients, the handover process could start a little bit earlier. Rather than waiting for the loss of capacity, maybe the person who has been granted the enduring power of attorney [could be] appointed as a trustee or director earlier,” Mansell said during a presentation at the recent Heffron Super Intensive Day 2021.

“Maybe doing something earlier rather than doing something upon the loss of capacity will give [trustees an opportunity] in terms of training this incoming trustee. They could learn the ropes off the parents, what the parents are trying to achieve and gain some insight into the goals and income needs.

“In the event the donor eventually loses capacity, the EPOA is already entrenched in the role.”

She noted the opportunity for an EPOA to be involved in an SMSF has become a subject of interest for numerous trustees, particularly following the introduction of the six-member fund bill in early September.

“Advisers might find that some clients find six-member funds attractive because now they can add a few members if they’ve got multiple children,” she said.

“Let’s assume that the parents lose capacity and maybe they’ve got the child as the enduring power of attorney and ultimately they want their child to look after their financial affairs.

“This could be an option to get the EPOA in and train them so everybody understands how SMSFs work.”

She noted adding an EPOA as a fund trustee did have challenges and an adult child as an EPOA would also have a bird’s-eye view of their parent’s financial affairs, which in some cases may be problematic.

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