In the third video of our series examining the five key self managed super fund (SMSF) estate matters you must talk to your clients about, Senior Associate Kate Gould highlights the important compliance obligations of powers of attorney in relation to SMSFs, particularly:
- if the client is relocating overseas; and
- to allow the attorney to validly execute or update death benefit nominations. This could be important in light of the recent superannuation transfer balance cap rules
Unfortunately we are seeing many instances where the SMSF has been not been given the consideration it deserves in ensuring it remains complaint and aligns with a client’s estate planning objectives. One aspect clients should consider is the role of powers of attorney and their SMSF, in particular:
- ongoing compliance obligations where a member is relocating overseas, or where a member loses capacity; and
- the ability to deal with and execute SMSF related documents, such as DBNs on behalf of an incapacitated member.
From a compliance perspective, the SIS Act allows a member’s legal personal representative to be appointed as a trustee of a SMSF in certain situations to maintain the complying status of the SMSF. For this to be effective during a member’s lifetime the LPR can only be appointed under a valid EPOA, that is effective immediately. From a practical point of view, clients should be encouraged to put in place appropriate powers of attorney that meet this criteria if they are considering any prolonged absence from Australia, or where future incapacity may be an issue . This will avoid the potential for a fund to become non-compliant.
Regarding DBNs, specific power should be included in a client’s EPOA to allow attorneys to enter into conflict transactions (in case a DBN needs to be amended), and executing superannuation documents. This is of course subject to the circumstances of the client and having the appropriate checks and balances in place. This should also be completed in conjunction with a review of the terms of the SMSF deed to make sure there are no limitations on an attorney exercising the powers of a member. If capacity has been lost and there is no power under a POA to execute or renew a BDN, then an application may need to be brought in the Civil and Administrative Tribunal.
The ability of advisors to raise these issues will demonstrate how planning can minimise future risks and stand them in good stead with clients and their successors.
Please click here to watch the video.