Scenario two: Planning for individual trustee incapacity. Each individual trustee of the fund should grant an enduring power of attorney so that the attorney can take over as the trustee of the fund in their place in the event of legal disability. The fund deed must allow the appointment of the enduring attorney as trustee to happen.
An SMSF member’s legal personal representative (LPR) can play an important role in the operation of the SMSF should they lose mental capacity or die. All members of the fund must be individual trustees or directors of the corporate trustee but a person under a legal disability (such as mental incapacity ) cannot be a trustee or director of corporate trustee of an SMSF. This means, if a trustee or a director of an SMSF loses mental capacity whether by deteriorating health conditions or by. What is a SMSF trustee?
Can a trustee be a trustee? How many trustees can a SMSF have? To this en Keating revealed the ATO addresses specific safeguards that are relevant in situations where mental incapacity of trustees may be present. The Court decided: Tony and Estelle were the trustees of the SMSF at Peter’s death and remained the trustees until properly changed under the SMSF trust deed. Townsends Business and Corporate Lawyers solicitor Jeff Song said all members of an SMSF must be individual trustees or directors of the corporate trustee , but a person with a legal disability, such as mental incapacity , cannot hold either position.
Differences between SMSF trustee structures. In the event of the death or incapacity of a. Once the administrator is appointe the administrator, as with an attorney, can become the trustee or director of the trustee company in place of the member. The advantage of this is that the member does not have to roll out of the SMSF and the control of the SMSF can remain with the family of the incapacitated member,” she said. As part of our non-lodgement program, we tend to cluster our non-lodgers into groups so that we target our messages,” Mr Keating said at the LightYear Docs Virtual Strategy. Planning for trustee incapacity is chronically overlooke despite the risk of an SMSF becoming non-compliant if appropriate provisions are not in place.
It is likely only a minority of trustees have planned for incapacity , with DBA Lawyers director Bryce Figot describing trustee incapacity as the “elephant in the SMSF room”. If you are currently a trustee or a director of a corporate trustee of an SMSF , you will recall signing a number of legal documents for your appointment and acceptance to be appointed as such. SMSF trustees are only able to release super funds for permanent incapacity if a member provides the required certificates from two medical practitioners, just like any other super fund. Trustees should also pass any member TPD insurance claims onto their insurance company for assessment and processing. If the fund is to remain compliant, steps must be taken to deal with this issue if and when it arises.
If it is your spouse and they are the only other member then they need to find a second person to act as a trustee or move to a sole director company trustee. You may also consider appointing a corporate trustee. A corporate trustee will continue to control an SMSF and its assets after the death or incapacity of a member. I recently did a co-presentation with Louise Biti from Aged Care Steps for the Self Managed Superannuation Fund Association on how SMSF Trustees can plan for incapacity or just that time when they no longer wish to run their fund.
This can be costly and time -consuming. The response was great and the questions from the floor really brought it home to us that people are very concerned. Should someone with legal incapacity remain part of the SMSF ? Essentially, the governing rules form the foundation upon which all the other steps build. Step — strongly consider a sole purpose corporate trustee.
There are many advantages of a sole purpose corporate trustee of an SMSF. Incapacity and your SMSF To qualify as an ‘ SMSF ’, one requirement is for all fund members to be trustee , or director of the corporate trustee (exceptions apply). The other trustee is her husband John. For example: Jane is the sole member of a SMSF and is one of two trustees.
This is particularly the case in the event that SMSF members suffer from legal incapacity. Where this occurs, the incapacitated person can remain a member of the fund if another person holding an enduring power of attorney acts as trustee for them. With individual trustees all SMSF assets are owned in the name of the trustees.
On death of one trustee , ownership will need to be changed to the new trustee. Often, that is the time when the surviving member (usually the spouse) chooses to put in place a corporate trustee. A potential solution to the problems arising on the incapacity of an SMSF member is for an individual trustee or a director to nominate a successor.
For the sake of completeness and greater certainty, the nominated successor should also be the donee of the nominating member’s EPA. In this article, we examine the condition of release of temporary incapacity.