Speaking to SMSF Adviser, SuperConcepts executive manager, SMSF technical and private wealth, Graeme Colley said some single-member SMSFs are still not putting in place estate planning and enduring powers of attorney, which can make things difficult in the case of incapacity or death.
Where there is only one director of a corporate trustee of an SMSF and they don’t have a will or enduring power of attorney in place when they die, Mr Colley said family or friends of the member would have to go to the court to get letters of administration, which can take time.
“Clients need to make sure they get a will and make sure they put in place an enduring power of attorney, because if you’re the only member of that fund and the single director of the trustee company, that creates a lot of trouble for the people that you leave after you die,” Mr Colley cautioned.
“Last year, I dealt with a client who had a brain tumour and her husband was really concerned because she didn’t have a will or an enduring power of attorney. He had to go to the guardianship board to ask for powers to be granted for him to look after her as her legal personal representative. That was granted under the particular tribunal but it took a little while for that to be organised.”
Mr Colley said it is vital that SMSF clients understand the importance of setting up an enduring power of attorney before they become sick or ill or something else happens.
“You could be involved in a car accident or something which happens very quickly. In other cases, illness may lead to disability over a [longer time frame],” he noted.
“It’s a lot more difficult to put things in place once something has already happened.”
Mr Colley also pointed out that a lot of trust deeds for single-member funds contain a requirement that new directors must be appointed by the member.
“That creates issues with the trust deed itself because I can’t appoint another person if I’m unable to look after my own affairs,” said Mr Colley.
“That seems a real paradox. There must be a better way of structuring trust deeds. I’m not a lawyer but that’s one of the faults I see in trust deeds for single-member funds.
“If it’s the member that appoints the replacement trustee and if that member [has lost capacity] then who do you get to appoint that director or the replacement trustee? That creates some issues.”
