Last minute decisions, like a spur-of-the-moment holiday with friends, are times when individuals might consider what should happen to their financial affairs if something goes wrong while they are away.
Those with an SMSF need a way of ensuring things continue to happen the way they want them to, as far as superannuation is concerned. One way of guaranteeing this is to appoint a trusted reliable enduring power of attorney to help with financial and legal affairs.
When an SMSF trustee goes overseas, into hospital, or starts suffering a decline in health, the law allows them to appoint an enduring power of attorney (EPoA).
An EPoA is someone who can do anything a trustee can do financially. This person, therefore, shouldn’t just be anyone; rather, it needs to be someone with financial experience who understands what the role involves. The chosen person must also know what the trustee wants.
While an EPoA has significant power over an SMSF trustee’s financial affairs (which the trustee endorses when they appoint them), it is unlikely trustees want them to exercise this unlimited power at their discretion. The power an EPoA exercises should follow instructions that the trustee provides.
However, the only way an EPoA will be able to do this is if the trustee prepares clear instructions in advance and keeps the EPoA updated of any changes. For example, if an SMSF has share investments, the trustee should maintain a record of what they expect from each share parcel when they bought it and the circumstances when they might sell it. This kind of information is vital if someone else has to make a sell decision on your behalf.
While an EPoA may appear to be a relatively simple arrangement because instructions are often expressed in the broadest of terms, those who appoint an EPoA can specify special conditions, limitations and instructions relating to the exercise of the attorney powers. Individuals can also specify the start time or the circumstances in which an EPoA can begin using their powers.