An enduring power of attorney (EPOA) is the best way to address the incapacity of an SMSF trustee, but they are not automatically applied under law, a superannuation lawyer has warned.
Townsends Business and Corporate Lawyers superannuation online services division managing solicitor Jeff Song said SMSF trustees looking to deal with the issue of possible future incapacity could appoint a financial manager under guardianship laws or choose an enduring attorney via an EPOA.
“The EPOA is the best way to resolve the issue of incapacity as it is far easier and quicker for someone to appoint an enduring attorney for themselves by signing an EPOA,” Song said during a webinar presented by the firm earlier today.
“Provided they have the full mental and legal capacity to make that decision, it’s the best chance that they’ve got to appoint someone who they want, unlike the guardianship laws or the financial management laws, which can have different variations and be more time consuming [to put in place].”
He said under the Superannuation Industry Supervision (SIS) Act, an enduring attorney was considered to be a legal personal representative and in regards to trustee incapacity, a member could remain within a fund and the fund could continue to satisfy the definition of an SMSF where a legal personal representative was acting on their behalf as a trustee or director of a corporate trustee.
The SIS Act, however, did not automatically authorise someone to act as a legal personal representative and that act had to be carried out by the trustee while they still had capacity, he added.
“We have to be careful because section 17A [of the SIS Act] is not an empowering provision and it does not go as far as saying that a legal personal representative is deemed to be a trustee or director of the corporate trustee,” he noted.
“SMSF clients will need to take an extra step, if they have a legal personal representative, of having that person formally appointed in accordance with the relevant governing rules of the fund or of the Corporations Act.
“For someone to sign an EPOA document they need to have the right level of legal capacity, so it’s important that the planning is done in advance rather than waiting to see the signs of loss of capacity, because it might be too late for them to do that.”