Trying to withdraw money from a superannuation fund before death as a member benefit under an enduring power of attorney (EPOA) may be allowable in some cases, but questions remain as to whose best interest is being met, according to an SMSF legal expert.
DBA Lawyers special counsel Bryce Figot said the treatment of a benefit payment being requested before death but made after that event, as recently revised by the ATO, cannot be sidestepped by the use of an EPOA when making the withdrawal.
In mid-February, the regulator announced a shift in its previous stance and that now where a trustee was paying benefits after a member died, it would be highly unusual circumstances for that not to be a death benefit.
Speaking during a recent online presentation, Figot said in the event someone was trying to withdraw superannuation before a member’s death, they would be acting under an EPOA because if the member still had capacity they could request that withdrawal personally.
“This can be an issue because the fundamental relationship the attorney has with the member who has lost capacity is a fiduciary relationship,” he explained.
“When you are trying to rip money out of the super fund under an EPOA, in whose best interest is the attorney acting? It is probably in the best interests of the survivors.
“If something goes pear-shaped and there’s a beneficiary dispute, you could be in an awkward situation.
“If your response to that dispute was to state the withdrawal was made to avoid tax, and that might be the true reason, in a beneficiary dispute do you want to go into court and say that?”
According to Figot the revised ATO position was correct and unless there was a very strong likelihood the payment of money after someone has died could be proved to be a member benefit, it should be considered and accepted as being a death benefit.
Even where a member had planned to make a payment and the EPOA referred to that plan, it would only go part way to absolving the attorney, he noted.
“If the member expressly authorised that withdrawal to be made, I would feel more comfortable from a fiduciary point of view, but unfortunately it does nothing to address the issues of a beneficiary dispute,” he said.
In the same presentation, he warned advisers who recommend clients use undated documents to authorise the payment of a member benefit may breach tax rules around the promotion of a tax exploitation scheme.