Who can step into as trustee of my Self-Managed Super Fund (SMSF) if I am unable
to continue to act as a trustee?
As an individual trustee or a director of a corporate trustee you already know that control of the Self-Managed Super Fund (SMSF) comes with significant responsibility. But what happens if one day you find that you no longer able to perform your responsibility as a trustee?
Being unable to meet your responsibilities as a trustee may be due to an accident or a serious medical issue or it might simply occur as a result of getting older. Making financial decisions can become increasingly difficult and running an SMSF may become too hard. Many trustees find themselves engaging a professional such as a financial adviser for financial and investment advice and to help manage their reporting and administrative obligations of their fund for assistance during this difficult time. As a reminder, engaging a professional does not alleviate your responsibility as a trustee, the running of an SMSF ultimately still rests with you.
Under super legislation law, a person under a legal disability (which includes mental incapacity) cannot be a trustee or director of a corporate trustee of an SMSF. For the fund to continue to remain compliant, the trustee must take steps to deal with the issue when it arises.
As a trustee how do you prepare for this possibility?
In the event that the trustee loses capacity, superannuation law allows an Enduring Power of Attorney (EPOA) to act as a trustee or director of a corporate trustee in place of a trustee who has lost capacity. An enduring power of attorney is a legal document that allows an individual to nominate one or more persons (referred to as attorneys) to act on their behalf. You can appoint anyone as your attorney, provided they are 18 years of age or older and have full legal capacity. Choosing someone to run the fund on your behalf shouldn’t be treated lightly as it requires trust and responsibility. The new appointed trustee or director will take responsibility for ensuring that the fund meets its legal and compliance obligations, as well as making decisions
around fund investments and payment of benefits.
As a trustee, you would need to appoint an EPOA before you lose capacity. EPOA arrangements can be made so that they come into effect immediately or remain dormant until a specific event or circumstance arises. For an EPOA to take your place you would be required to resign as a trustee, and they would be appointed in your place. EPOA is generally prepared by a lawyer and can be revoked at any time provided that you are still competent.
You will need to ensure that you notify your fund administrator of the changes that have been put in place.