Special Purpose SMSF Enduring Powers of Attorney

A standard Enduring Power of Attorney may allow an attorney to replace an SMSF member as trustee if the member loses capacity. However, once appointed as trustee, the attorney’s powers are generally governed by the fund deed, superannuation law and trustee law.

This can create uncertainty about when the member should step down, what authority the replacement trustee should have and how the member’s superannuation interests will be protected.

Inherit supports the preparation of a Special Purpose (Restrictive) SMSF Enduring Power of Attorney, designed specifically for compatible SMSF trust deeds.

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Protect a client’s SMSF if they lose capacity

More control than a standard EPOA

The SMSF EPOA is designed to limit the attorney’s role and authority when they are appointed as trustee in place of a member who loses decision-making capacity.

It allows the client to set out how their appointed attorney may act if they become a replacement trustee or director of the fund’s corporate trustee.

The document can establish:

Powers the replacement trustee may exercise (Express powers)
Decisions requiring approval from a Fund Guardian (Consent powers)
Powers the replacement trustee is prohibited from exercising (Prohibited powers)
The process for determining when the member has lost capacity
What happens if the member later regains capacity
Whether the replacement trustee remains in office following the member’s death

The client may prepare a separate Enduring Power of Attorney for their personal, business and non-superannuation affairs.

Appoint a trusted adviser as Fund Guardian

A key feature of the SMSF EPOA is the ability to nominate a trusted adviser as the client’s Fund Guardian.

The Fund Guardian may be the client’s accountant, financial adviser or another appropriate professional familiar with the fund and the client’s circumstances.

Depending on the instructions selected, the Fund Guardian may:

Consider whether the member has lost capacity
Approve or reject specified decisions proposed by the replacement trustee
Monitor whether prohibited powers are being exercised
Require the replacement trustee to reverse decisions that breach the SMSF EPOA
Continue supporting the administration of the fund during the member’s incapacity

The Fund Guardian does not become a trustee or member of the fund merely by accepting the appointment. They do not carry fiduciary responsibilities and may charge for their services.

A structured process for determining capacity

Cognitive decline can develop gradually, making it difficult to determine when an SMSF member should cease acting as trustee.

The SMSF EPOA provides a structured process intended to reduce the risk of a member being removed prematurely while also protecting the fund if the member can no longer manage its affairs.

The process can require:

The attorneys to ask the member to step down if they believe the member has lost capacity.
The member to agree or disagree with that request.
The attorneys to seek the Fund Guardian’s agreement if the member disagrees.
A cognitive assessment by a suitably qualified professional if the member and Fund Guardian do not agree.
The member to step down only after the required process has been followed and loss of capacity has been established.

If the member subsequently regains capacity, the SMSF EPOA can require the replacement trustee to step down so the member can resume control of the fund.

Define what the replacement trustee can and cannot do

The SMSF EPOA can divide the replacement trustee’s authority into three categories.

Express powers

These are the decisions and functions the replacement trustee is permitted to exercise under the SMSF EPOA and the fund’s governing rules.

Consent powers

These are decisions the replacement trustee may only make after receiving approval from the Fund Guardian.

Prohibited powers

These are decisions the replacement trustee is not permitted to make or participate in.

This structure can help protect the member’s interests, reduce the risk of financial abuse or mismanagement and manage potential conflict between attorneys and other fund members.

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Designed to work with the SMSF trust deed

The SMSF EPOA is custom-made for the Smarter SMSF trust deed and a limited number of other compatible deeds.

The Enduring Power of Attorney, Deed of Appointment of Fund Guardian and supporting trustee resolutions are incorporated into the fund’s governing arrangements so that the restrictions are intended to bind the replacement trustee and the continuing trustees of the fund.

Before preparing the documents, the practice should confirm that the client’s SMSF trust deed supports the required provisions.

Where compatibility or legal obligations are unclear, the matter should be reviewed by a lawyer familiar with the operation of the SMSF EPOA.

Prepared for each individual member

An SMSF EPOA is prepared separately for each fund member.

Two members of the same SMSF will therefore require two separate SMSF Enduring Powers of Attorney.

Each member may choose:

One or more attorneys
The same or different attorneys for their personal EPOA
A Fund Guardian
A replacement Fund Guardian
The powers requiring the Fund Guardian’s consent
The powers prohibited to the replacement trustee

Whether the replacement trustee remains in office after death

Add specialised SMSF incapacity planning to your service

Inherit gives advisers and practices a guided workflow for collecting the client’s instructions and preparing the SMSF EPOA, Fund Guardian appointment and supporting fund documents.

This gives your practice a structured way to address incapacity planning for SMSF clients while involving the client’s accountant, financial adviser and lawyer where required.

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