Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 374

Every SMSF trustee should have an Enduring Power of Attorney

If you’re an SMSF trustee, there are several vital things to consider when it comes to your estate and succession planning.

COVID-19 shows need to prepare

Your will enables assets to be distributed in accordance with your wishes when you die, and a binding death benefit nomination will direct your super and any insurance benefits to your chosen beneficiary.

However, many people are not prepared for what happens if a trustee is incapacitated and not able to act either on a temporary or permanent basis.

COVID-19 and the events of 2020 are an indication of why now, more than ever, SMSF trustees need to be prepared for the ‘unexpected’ by having an Enduring Power of Attorney (EPOA) in place.

An Enduring Power of Attorney is a legal agreement that enables an individual to appoint another person or people to make financial, personal, medical or property decisions on their behalf in the event that the individual is unable to act. This appointment can be either on a temporary or permanent basis depending on the reason for the appointment.

Importantly, superannuation law allows an EPOA to act in the place of the member without causing the fund to cease to be an SMSF.

Different to a Power of Attorney

Many people believe that if they have a Power of Attorney in place their SMSF is secure. However, what happens if mental capacity is lost? Unfortunately, in this circumstance the Power of Attorney ceases to operate which is why it is important to have an EPOA in place.

All members of an SMSF must be trustees, but to be a trustee of an SMSF an individual cannot be under any legal disability including mental incapacity. If a trustee becomes unable to act or loses capacity, they must be removed, and someone will need to be appointed either temporarily or permanently in the trustee’s place until the individual can act again on their own.

A person acting as an Enduring Power of Attorney will take on all responsibilities of being a trustee. They will make financial decisions on the members' behalf. This will include the acquisition and disposal of investments, transacting on the fund’s bank account and paying all expenses of the fund including pensions. They will also be responsible for the signing of financial statements, annual returns, and other mandatory compliance minutes required.


Register here to receive the Firstlinks weekly newsletter for free

In other words, they will oversee the day-to-day running of the SMSF in much the same way the member themselves did.

As blended families are becoming more prevalent, having an EPOA can avoid unnecessary friction or certain unanticipated actions being taken.

Anyone can be appointed as an EPOA and more than one EPOA can be nominated to act jointly in making the decisions. It is also a good idea to appoint a substitute where possible should one of the EPOAs not be able to take on the responsibility of being a trustee.

If something adverse happens without an EPOA in place, there can be dire consequences. For example, if a member resides in NSW an application would need to be made by the next of kin to the NSW Civil and Administrative Tribunal to obtain an order to enable the SMSF assets to be dealt with.

If you have an SMSF, don’t leave your assets to chance and arrange not just a Power of Attorney, but an Enduring Power of Attorney sooner rather than later.

 

Karen Dezdjek is Director, Superannuation and Wealth at Prime Financial Group. This article is general information and does not consider the circumstances of any individual.

 

RELATED ARTICLES

Importance of updating your SMSF Trust Deed

SMSFs during COVID-19 and your 14-point checklist

Watch your SMSF’s annual return this year

banner

Most viewed in recent weeks

400th Edition Special: 45 of the best investment ideas

Over eight years since February 2013, Firstlinks has become a leading financial newsletter, publishing thousands of articles from hundreds of writers. To mark this milestone, 45 experts have joined the celebration for our 400th edition bringing their best investing ideas for the next few years.

Four bubbly market pockets show heightened risk for investors

At the top of every market, there are signs that investors look back on and say the excesses were obvious. While many parts of the market are fairly valued, here are four bubbles which show irrational exuberance.

Turning point: the 2020s baby boom retirement surge

Every week, 2,500 Australians retire, or at least, reach the age of 65, and 2021-2027 will represent the peak years of the baby boom retirement surge. Longevity of life comes with dangers and opportunities.

How long will my retirement savings last?

Many self-funded retirees will outlive their savings as most men and women now aged 65 will survive at least another 20 years. Compare your spending with how much you earn to see how long your money will last.

The world in 2030: Six investing tips for the next decade

Six portfolio managers look at how life may change by the end of the decade and how shifting trends are influencing their investment decisions. It's an optimistic view of the world in 2030 as a better place.

The equity of government support for retirement income

Claims about the inequity of super tax concessions and the advantages for high income earners miss a fundamental point. It's fairer with more realistic assumptions on the value of future payments.

Latest Updates

Superannuation

In fact, most people have no super when they die

Contrary to the popular belief supported by the 'fact base' of the Retirement Income Review, four in every five Australians aged 60 and over have no super in the period up to four years before their death.

Investment strategies

The risk-return tradeoff: What’s the right asset mix for a 5% return?

Conservative investors are forced to choose between protecting capital and accepting lower income while drawing down capital to maintain living standards or taking additional risk. How can you strike a balance?

Investment strategies

Mind the bond/equity rebalancing gap

The 12 months ending 31 March 2021 saw the largest positive divergence in returns between global equities and bonds in nearly 50 years. To retain a target balance, investors need to sell equities and buy bonds.

Investment strategies

Do bonds still offer a buffer to equity volatility?

Most Australians place their superannuation into a balanced fund, making the relationship between bonds and equities a vital part of performance. Does the traditional correlation between shares and bonds still hold? 

Strategy

Five trends shaping investments in China: 2021 and beyond

Australia has its tensions with China but with a strong base and a competitive, well-educated workforce, China’s manufacturing champions will advance its technology prowess and gain global market share.

Investment strategies

The fascinating bank hybrid journey of the last year

Bank hybrids produced excellent returns in the last year and the biggest lesson from March 2020 is that many investors don’t understand the structures, and in a crisis, they panic first and think later.

Shares

Eight quick lessons on the intricacies of selling shares

When we think about investing, we think about buying. The intricacies of the selling decisions are frequently overlooked, and poor selling is correlated to a lack of conviction. Selling is as important as buying.

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.