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PKF Australia

Accountants and Business Advisers

Crucial documents for SMSFs

Crucial documents for SMSFs

Posted 17 Jul 13 by Damien Passmore

There are a number of legal documents that are crucial to the operation of a self-managed superannuation fund (SMSF).

The superannuation fund trust deed is a crucial document because it outlines the way in which the trustee(s) of the fund are empowered to act in respect of Fund assets, liabilities, member benefits, superannuation death benefits and the like.

When it comes to superannuation death benefit planning, any binding death benefit nomination that has been submitted by a member of a Fund is also crucial. Such a nomination removes the superannuation benefit discretion from the trustee so the member's valid nomination must be followed.

Both of these documents are essential to the succession plan of a SMSF, however there is a third document that receives far less airplay but is just as important - an enduring power of attorney.

While death is a certainty for all of us, incapacity is increasingly becoming the precursor to death.

This incapacity can occur through accident, illness or even simply due to the frailty of age.

For most SMSFs, the trustee(s) of the Fund (or directors of the trustee corporation) are also the member(s) of the Fund, so the incapacity of a member is also the incapacity of at least one of the controllers of the SMSF.

Across all SMSFs the most common number of members in a Fund is two. This also translates to either:

  • Two individual trustees.
  • Two directors of the Trustee Corporation. 

Many trust deeds stipulate that power to change the trustee of the Fund rests with a majority of members. In the case of a two member fund with a standard trust deed this requires both members to have capacity to vote (and to vote the same way).

In addition, for a two member (two trustee) Fund, both trustees need to act in unison in order to sign documents and/or make many of the trustee decisions crucial to the ongoing operation of the Fund.

Many deeds have a clause that covers the situation where one of the trustees/members becomes 'legally disabled' and the most common solution under such circumstances is for the Legal Personal Representative of the trustee/member to step into their shoes until the legal incapacity ceases (if ever).

In the case of someone who has passed on, their Legal Personal Representative is generally the Executor of their estate. For someone who has lost capacity, it is generally one who has been nominated under a valid Enduring Power of Attorney.

As such, an enduring power of attorney is a critical planning and succession document for anyone who is a member and/or a trustee of a SMSF.

In the absence of this document it will often be necessary for those seeking to act for the incapacitated trustee/member to apply to the Supreme Court to be given the requisite power, a far more costly exercise than putting in place an Enduring Power of Attorney prior to the loss of capacity.

For further information, contact one of our Wealth Creation specialists.


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