Everyone should consider having a Will, an Enduring Power of Attorney and Enduring Guardianship to ensure their affairs are in order should the worst occur.
This is particularly important if you have a SMSFs. If every member does not have an enduring power of attorney it can cause the SMSF significant compliance issues as well as unintended financial consequences.
If a SMSF member becomes mentally incapacitated, they can no longer effectively be a trustee of their SMSF or director of a SMSF trustee company. Accordingly, the SMSF can no longer satisfy the member and trustee rules in the Superannuation Industry (Supervision) Act 1993. If proper arrangements have not been made, the mentally incapacitated member must leave the SMSF and take their benefit as a lump sum and the appoint an approved trustee which may include rolling over into a retail fund.
However, if a SMSF member has an enduring power of attorney in place, then the Act permits the attorney to become the SMSF trustee or director in the place of the mentally incapacitated member and thereby the member is permitted to remain in the SMSF. Naturally, the SMSF and the constitution of the trustee company (if relevant) should be reviewed to ensure that changing trustees to the members’ attorneys is allowable.
The type of the power of attorney is very important. A general power of attorney will not help. It must be an enduring power of attorney. In NSW there is a prescribed form that must be used. A solicitor must also provide a certificate that they explained the effect of the enduring power of attorney for it to be effective.
Enduring Powers of Attorney are powerful documents. You should choose wisely when selecting your attorney. You should also ensure your attorney is eligible to be appointed as a SMSF trustee or a director of the SMSF trustee company.
This short blog is intended to provide a general guide to the subject matter. Professional legal advice should be sought about your specific circumstances before commencing any course of action.