Legal compliance is the name of the game for SMSF trustees and members
Self-managed superannuation fund (SMSF) trustees and members must hold enduring powers of attorney to ensure ongoing legal compliance. Similarly, directors of SMSF corporate trustees must also hold enduring powers of attorney.
Why is an enduring power of attorney necessary for SMSF trustees and members?
Australian superannuation laws require that every member of an SMSF must also be a trustee of the SMSF (or a director of the corporate trustee). If the trustee loses decision making capacity, then they cannot fulfil the role and the SMSF may no longer be compliant with the legislation. This can have costly consequences.
A valid enduring power of attorney (and company power of attorney in the case of a corporate trustee) will allow a nominated person to be appointed to the role if the trustee cannot make these decisions.
Why shouldn’t I leave it until later in life to make an enduring power of attorney?
It is recommended that anyone over 18 years of age should consider making an enduring power of attorney.
For example, Jonathan, 29, was a member and trustee of a SMSF. He unexpectedly suffered a serious stroke and as a result no longer had decision making capacity and could not fulfil his vital role as trustee of the SMSF. He had not made an enduring power of attorney before his mental capacity was affected by a stroke. Consequently, the SMSF is non-complying under Australian superannuation laws.
Under current Victorian laws, a person cannot choose to make an enduring power of attorney if they do not have decision making capacity.
It is important in these circumstances that it is an enduring power of attorney and not a general non-enduring power of attorney. An enduring power of attorney operates even if the principal loses decision making capacity, such as in the example above. Conversely, a general non-enduring power of attorney ceases to operate when the principal loses decision making capacity.
What is the role of an attorney?
In some circumstances, you can give an enduring power of attorney to your attorney to take over your duties, including your duties as the trustee of a SMSF. In replacing you, where necessary, the powers you give your nominated attorney will allow that person to replace you as trustee to benefit you as the member. The duties would include:
- Withdrawing funds from the SMSF to be paid to you as the member
- Dealing with real estate of the SMSF
If you lose capacity, your attorney must be appointed as Trustee of the SMSF (or director of the corporate trustee). Australian laws require this within six months of the incapacity, failing which, there could be consequences for the SMSF.
How we can help
Our estate and succession planning team is available to:
- Review your SMSF deed to ensure it allows a trustee to be replaced by someone with an enduring power of attorney and if not, amend the deed
- Prepare your enduring power of attorney and company power of attorney and advise you on their operation and scope
Taking some simple steps now and engaging legal advice can help your SMSF to remain compliant if the unexpected happens. Contact us today to find out more about how we can help you put in place appropriate powers of attorney for your circumstances.
This article was written by Wills & Estate Lawyer, Hayley Najim.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from marshalls+dent+wilmoth and other relevant experts.