What is an Enduring Power of Attorney?
An Enduring Power of Attorney is a legal document that ensures that if the worse happens and you lose your mental capacity through injury or through the onset of a medical condition, such as Dementia or Alzheimer’s, then there is a person in place, whom you trust, to protect your assets and to take care of you and your affairs.
An Enduring Power of Attorney is often constructed for a person who has received a medical diagnosis that will affect their mental capacity and is done to protect their interests as the condition worsens.
It is vital though to have one in place if you are a member of a self-managed superannuation fund (“SMSF”).
Why is it important to have an Enduring Power of Attorney in place?
Having an Enduring Power of Attorney in place is important in the case of a SMSF due to the fact that if you are a member of the fund, then you must also be a Trustee or a Director of the Trustee Company. Where a Trustee/Director loses mental capacity, then their position may become vacant, which means the SMSF faces the prospect of being non-compliant with the ATO. This can only be avoided by the Trustee/Director rolling over their benefit to a retail fund or arranges for a suitable replacement approved by APRA to be put in place as Trustee.
Rolling over your benefit to a retail superfund brings with it significant tax consequences, such as Capital Gains Tax and Stamp Duty.
This is where an Enduring Power of Attorney comes into play, as if you have one in place then under the Superannuation Industry (Supervision Act 1993, a person appointed under an Enduring Power of Attorney is authorized to act in the place of you as a replacement Trustee/Director. This means the SMSF can continue to operate as normal and the benefit does not need to be rolled over to a retail super fund.
Having an Enduring Power of Attorney constructed is a simple and inexpensive process. Your lawyer can draw up the appropriate legal document and have it signed by you and the person you wish to act on your behalf.