Preparing for Loss of Capacity
As we go about our day to day lives we never think about what could happen to us, whether it’s becoming permanently or temporarily disabled, becoming quite ill or even getting into an accident. For members of a self-managed super fund (SMSF) this could become an issue. What as members and trustees of your fund can you do to prepare and handle these situations?
The first thing to do regardless of whether you have individual or corporate trustees is for each member to appoint a legal personal representative (LPR) under an enduring power of attorney. By doing this, if you or another member become disabled and unable to conduct your normal duties as a member / trustee of your SMSF, then your legal representative steps in and takes over for you. What you should make sure is that you choose the right person to appoint as your legal representative. As you need to be certain that they understand what it takes to run an SMSF and the duties required of a member / trustee.
What you then need to ensure is that your Trust Deed allows for the legal representative to become a member / trustee of your SMSF. Not all trust deeds allow for this and you need to make sure yours is flexible enough to allow the appointment of a replacement director or trustee depending on your structure. If your trust deed doesn’t allow for this then in the event a member becomes disabled then the their super benefits may no longer be able to remain in the SMSF and must be paid out to another fund.
The final thing to do is to assess your trustee structure to ensure it allows for the seamless transition for the legal personal representative (LPR) to replace the disabled member.
The table below outlines the differences between an individual and corporate trustee structure.
Every situation differs and a member becoming disabled doesn’t always occur, thankfully! But by following the tips above you’ll be prepared for the worst case scenario. Our office will be able to assess whether or not you’re ready for this event, so feel free to pick up the phone and give us a call!
Table Source: SMSF Adviser
