An Enduring Power of Attorney is an important legal document that ensures if you lose your mental capacity through injury or the onset of a medical condition (e.g. Alzheimer’s or dementia) then you have someone in a position of trust to protect your assets and to take care of your affairs.
An Enduring Power of Attorney is especially important if you are a member of a self-managed superannuation fund (SMSF).
Generally, if you are a member of a SMSF you must also be a Trustee or a Director of the Trustee company. Where a Trustee/Director loses mental capacity, then the position of the Trustee/Director may become vacant. As a result, the SMSF may risk becoming non-compliant by the ATO unless the Trustee either rolls over the incapacitated member/ Trustee/Director’s benefit to a retail fund or arranges for a replacement APRA approved Trustee. Rolling over the member’s balance into a retail superfund can cause significant tax consequences (such as CGT and Stamp Duty) and can also lead to practical difficulties – for instance, the assets held within the SMSF may need to be sold and liquified in order to transfer the benefits to a retail fund.
However, if the member has appointed an Enduring Power of Attorney, under section 17A(3)(b)(ii) of the Superannuation Industry (Supervision) Act 1993 (the SIS Act) a person holding an Enduring Power of Attorney is authorised to act in the member’s place as a Trustee/Director. As long as the replacement Trustee/Director is appointed within 6 months of the incapacitated member ceasing to be a Trustee/Director, the member balance can remain within the SMSF.
Rather than running the risk of a non-complying fund, or having to go through the arduous process of transferring the SMSF assets to a retail fund, it is much simpler to have an Enduring Power of Attorney in place.[AM_MOREINFO]