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Temporary or permanent incapacity

    Home post_news Temporary or permanent incapacity
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    Temporary or permanent incapacity

    By admin | | 0 comment | 4 December, 2014 |

    Life’s two certainties Death and Taxes…

    Not your favourite subject?

    What about temporary and/or permanent incapacity?

    The old saying – “be nice to your kids they will eventually choose your nursing home” could have a parallel – “choose carefully who can make decisions for you if you lose your marbles”. However choosing is better than not choosing!

    temporary and permanent incapacity There is a possibility (however slim you might like to think) that at some point, one or more members of an SMSF may become temporarily or permanently incapable of managing their role as trustee.
    Preparing for this possibility will enable membership to continue, regardless of capacity. Losing the right to membership may mean transferring balances to a large fund, selling of assets not only being held for that member but perhaps also being held jointly for another member.

    Step 1: Appoint an Enduring Power of Attorney
    All SMSF members should appoint a Legal Personal Representative (LPR) under an Enduring Power of Attorney (EPoA), regardless of whether their fund has individual trustees or a corporate trustee.

    Should a member lose capacity and be unable to fulfil their role as director or trustee, their LPR may be able to step into this role, ensuring ongoing operation of the fund.
    Ideally an LPR should be a relative, friend or adviser who understands the requirements of an SMSF trustee and has sufficient time to devote to the task.
    It is also a good idea to review the appointment regularly.

    Step 2: Update the SMSF trust deed
    If the deed requires that members be trustees/directors and vice versa (with no allowance for the appointment of others, such as an LPR) it is vital the deed be updated.

    Step 3: Implement the best structure to enable LPR appointment
    The third step in preparing for incapacity is to ensure the trustee structure allows for an LPR to smoothly and quickly replace the member. A corporate trustee structure (compared with an individual trustee structure) significantly simplifies this process.
    Conversely, a corporate trustee where an LPR has been appointed allows for the easiest possible transition. The greatest difficulties emerge for individual trustee funds where an LPR has not been appointed.
    Attending to the steps above will pave the way for a smoother transition, whatever the individual circumstances. Contact Optima Partners if you would like assistance or further information regarding this issue.

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    Optima Partners is an energetic and innovative accounting, taxation and business advisory firm with offices in Osborne Park, Guildford and Fremantle.

    To discover how we help businesses across Perth please drop us a line today.

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