Estate Planning

Unchecked EPOAs dangerous to clients

EPOA status

SMSF advisers should be checking the status of their clients’ enduring power of attorney as any failures or deficiencies cannot be addressed after they have lost capacity.

Financial advisers who discover the status of client’s enduring power of attorney (EPOA) is deficient should recommend changes, but may find they are unable to enact any amendments without legal intervention, according to an estate planning lawyer.

HopgoodGanim Lawyers partner Brian Herd said SMSF clients who have an EPOA that does not extend to their trustee arrangements, including being the trustee of a corporate SMSF, may be trapped due to that oversight.

“What happens depends on two things and the first is if under the EPOA the attorney has been appointed to manage the financial affairs of the person and the second is what does the trust deed say,” Herd told delegates during a presentation at the SMSF Association National Conference 2023 in Melbourne today.

“Many old trust deeds never contemplated that a trustee would lose their marbles as they only ever contemplated that the trustee would die.”

He noted newer deeds address that shortcoming and had mechanisms to replace an incapable trustee with a legal personal representative, which could allow them to be executor of a person’s estate or the enduring power of attorney for the person with lost capacity.

“If your trust deed doesn’t cover both of those scenarios, it’s time to update your trust deed because otherwise you have to go to court to get an order to replace that trustee,” he said.

According to Herd financial advisers should be reading their clients’ EPOAs and if they had concerns to first raise them with their clients, but if that was impossible due to lost capacity, a court order may be the only way to resolve concerns or disputes.

“The only solution if there is a dispute or uncertainty about the meaning of a particular clause is to go off to court because the EPOA can’t be changed. It is what it is and if it’s subject to dispute about its meaning, someone has to decide that dispute either by agreement between the parties or by a court which says ‘that clause means this’.”

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