Acting as an SMSF Trustee and incapacity!
SMSF Trustee role needs to be considered in your Estate planning
Acting as a SMSF Trustee and incapacity are crucial issues to consider in running an SMSF. Have you considered what happens when something goes wrong, and you in a position to run your SMSF?
Control is one of the main reasons many establish an SMSF. As an SMSF Trustee, you can control your own SMSF. You as the SMSF Trustee and member can control how the Funds’ investments and the strategy on how and where. What happens if you can’t do it anymore?
What happens if things go wrong?
One day, you may be unable to meet your SMSF Trustee responsibilities. This can happen due to a loss of control or incapacity, which might be due to an accident, illness or death. But, in most cases, it will unexpectedly leave you with ongoing financial matters that need resolving unless you have done some planning.
Under the SMSF legislation, a person with a legal disability (including mental incapacity) cannot be a trustee or an SMSF.
Incapacity as an SMSF Trustee
Someone else must step in on your behalf when you cannot act as a Trustee. They basically act as an SMSF Trustee in your capacity. Your incapacity results in you having to relinquish control of your Trustee role. When appointing someone to act on your behalf, make sure the decision is based on Trust. Trust that the person who steps in understands and acts on your wishes and needs.
We also point out that, for ease of appointment of SMSF Trustees, we recommend that the structure of your SMSF include a Corporate Trustee rather than individual trustees.
Seek legal help that gets it right!
Your health and financial welfare are paramount. For more information, read our blog on Estate Planning.
It’s a great reason you need an adequately prepared and executed Will. Have you made an Enduring Power of Attorney( EPOA)? Preparing an EPOA (enduring power of attorney )will assist you in ensuring someone can step in and continue sorting out your financial affairs. They can then step in and manage your SMSF.
If you become incapacitated, they will undoubtedly have to set up in your shoes as an SMSF Trustee. Therefore, choosing the wrong person or no person can result in your wishes not being adhered to. Or, worse still, someone appointed as your replacement SMSF Trustee with the wrong intentions. Ie make decisions in favour of their wants rather than yours.
It’s essential that you choose wisely and that this person is someone you trust and has the financial ability to make the right decisions. Make sure you discuss their role and support this by considering executing Binding Death Nominations in the SMSF.
Reversionary pensions for those in pension mode are a great tool to enable the pension to be transferred to your partner upon death.
Now is the time to Act – not when incapacity strikes
Implementing tools in the case of incapacity as an SMSF Trustee will also issue some clarity to your estate planning wishes.
Thinking ahead and planning means if and when things don’t go as planned, you have a well-thought-out plan that will ensure your estate and any assets are dealt with your wishes.
