Growing older is an inevitable part of life and many of our clients over 70 mention to us that they are forgetting things or are just not as sharp mentally as they used to be.
The concern with an SMSF and diminished mental capacity is that if a Trustee or Director of a corporate Trustee of a SMSF loses legal capacity to make decisions for themselves, then they will no longer be able to perform their duties as a Trustee or as a Trustee Director and will need to be removed from the fund.
Generally, the Legal Personal Representative (LPR) of an individual is permitted to act in place of the member, either as a trustee of the member of director of the corporate Trustee if that person is holding an Enduring Power of Attorney (EPoA). Reference to the Trust Deed must be made for any appointments and removals of trustees/directors.
To comply with the trustee/member rules, the member must cease as the trustee/director and be replaced by their attorney(s), appointed under an EPoA.
It is important to have an EPoA in place before the member loses capacity as after the member has lost capacity it will generally be too late for them to appoint an EPoA,
We are not lawyers but we would urge all our clients to consider having an EPoA in place, should they lose the capacity to act for themselves, either for a short period of time or permanently. A lawyer will prepare this for you and we can provide a referral if needed.
If the EPoA is a permanent arrangement and the member has lost capacity we will arrange for a law firm to review the SMSF’s current deed and the EPoA documents will be reviewed to determine how the change of trustee can be made before preparing the required documentation to record the change. Depending on the requirements in the Fund’s Trust Deed/Governing Rules, the documents prepared will vary. However, in all instances a Change of Trustee Deed will be prepared.
