Managing a Self-Managed Super Fund (SMSF) is a significant responsibility that requires careful planning and attention to detail. One essential element of SMSF management is having enduring power of attorneys in place. In this article, we’ll explore what individual and company enduring power of attorneys are, and the reasons why SMSF Members and Trustees should have them in place.
What is an Individual Enduring Power of Attorney?
An individual enduring power of attorney is a legal document that allows someone to make financial decisions on behalf of an individual if they become unable to do so themselves. This can happen due to a number of reasons, such as an accident, illness, or other age related issues. The appointed person, also known as the attorney, can make decisions regarding the individual’s finances.
There are two types of individual enduring power of attorney – general and enduring. A general power of attorney gives the appointed person the authority to make financial decisions on the individual’s behalf while they are still capable of making their own decisions. This type of power of attorney ends if the individual becomes incapacitated.
An enduring power of attorney (EPOA), on the other hand, remains in effect even if the individual becomes unable to make financial decisions for themselves.
Importantly, an individual EPOA does not extend to the person’s role as director of their SMSF Trustee Company. They can’t just start taking on the duties of an existing SMSF Trustee director who has become incapacitated. The incapacitated director needs to be removed from the SMSF Trustee company and the EPOA appointed as the director in their place in accordance with the requirements of the superannuation legislation.
Reasons why SMSF Members should have an Enduring Power of Attorney in place
An EPOA cannot be put in place once legal capacity is lost, so a prepared SMSF Member will have one in place and ready for situations where it might be needed.
Some examples include:
If an SMSF Member/Trustee is leaving Australia indefinitely
If an SMSF Member/Trustee is finding it hard to continue to manage the SMSF
If an SMSF Member/Trustee becomes incapacitated
The super laws allow the EPOA to step in as SMSF Trustee or to be appointed as a director of the SMSF Trustee Company in place of the SMSF Member so that the SMSF can continue to be managed and comply with administrative and other requirements.
What is a Company EPOA?
A Company EPOA is a legal document that allows someone to make decisions on behalf of a company if one or more of the current directors becomes unable to do so. This can happen due to a number of reasons, such as illness, disability, or death. The appointed person, also known as the attorney, can manage the company’s affairs, such as signing contracts, dealing with suppliers, and making financial decisions. As many SMSF’s have a Company Trustee and may have a Custodian Company for their limited recourse borrowing arrangements this is an important document to consider.
Why is a Company EPOA worth considering?
Sometimes decisions and actions that are in the best interest of SMSF Members can’t wait. Without a Company EPOA, there can be times periods where decisions simply cannot be made or actioned.
A Company EPOA gives the appointed person(s) the ability to continue to take action that is in the best interest of the SMSF Members. For example, when:
the sole or all directors of an SMSF Trustee Company are overseas
a director of an SMSF Trustee Company or all directors of an SMSF Trustee become incapacitated (during the period before their EPOA is appointed)
the sole or all directors of an SMSF Trustee Company pass away
Being Prepared
Taking steps to prepare an SMSF for any eventuality means that is it best equipped to provide best interest outcomes for its members. It is important to consult with an SMSF Lawyer so that personal circumstances can be properly considered and legal documents tailored accordingly.
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