Managing Risk Of Trustee Incapacity

With an ageing population the number of Australians living with dementia is a risk facing many families. Currently 3 in 10 people over the age of 85 and 1 in 10 people over the age of 65 live with dementia. According to Alzheimer's Australia,  the number of cases of dementia in Australia is expected to increase to almost 900,000 by 2050.

Under SISA, a person who holds an enduring power of attorney (EPOA) granted by a member may be a trustee, or a director of the corporate trustee, in place of that member without causing the SMSF to breach the legislation. However, on activation of the EPOA, the person holding the EPOA must formerly be appointed as a trustee, including consenting to be a trustee and signing the appropriate declarations and notification to the Australian Taxation Office.

A person's incapacity will give rise to important succession and estate planning opportunities and strategies. Taxation savings can result from the attorney cashing a superannuation benefit immediately prior to a member's death.

Where a person has lost capacity, their attorney will usually have full control over the person's financial affairs including their superannuation. In summary an attorney's powers allows:

  • Cashing of superannuation benefits (if the member satisfies a condition of release)
  • Moving the member's benefit from one superannuation fund to another. This action may also result in revoking a binding death benefit nomination (BDBN).

It is unclear whether an attorney is able to make a BDBN for the member. The favoured view is that this is not possible.

If you have any queries regarding the information contained in this newsletter, please contact your Brentnalls SA advisor.


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