What’s your plan for future incapacity

I recently did a co-presentation with Louise Biti from Aged Care Steps for the Self Managed Superannuation Fund Association on how SMSF Trustees can plan for incapacity or just that time when they no longer wish to run their fund. The response was great and the questions from the floor really brought it home to us that people are very concerned about how they pass control of their wealth and well-being to others. A copy of the presentation slides are available here . As part of my preparation I developed a simple checklist of issues that SMSF trustees should use when they consider their options. This list is not exhaustive so please add your own tips or suggestions in the comments section below.

When planning for the management of your funds in your SMSF you must first read the Deed!

You do have an Original copy of the Deed or a Certified copy don’t you?

Who do you want to manage your fund if you die or are incapacitated?

• On death for Corporate Trustees you leave the shares in the trustee company via your will to the person(s) so they have a right to be a director of the trustee company.
• For incapacity you provide an Enduring Power of Attorney (EPOA) and when required you resign as a director and they are appointed in your place. If it is your spouse and they are the only other member then they become Sole Director.
• On death for Individual Trustees your Executor will usually have a right to be a trustee of the fund.
• For incapacity you provide an Enduring Power of Attorney and when required you resign as a trustee and they are appointed in your place. If it is your spouse and they are the only other member then they need to find a second person to act as a trustee or move to a sole director company trustee.

What to consider in the choice of an EPOA/Executor

• Are they good with money and making decisions?
• Will they be willing to seek advice from specialists if necessary?
• Will there be conflict between beneficiaries – Sibling rivalry? Blended families?
• Should you consider 2 or more EPOAs/Executors for safety or support
• a power of attorney (or POA) can either become effective immediately, or upon the occurrence of a future event (such as your mental incapacity).
• A power of attorney can have specific clauses with instructions for the operation of the power.
• If you have a spouse or dependant you may want to include Dependants Clauses to ensure your funds can be used for their needs.
• You may want to consider a Conflict of Interest clause to allow a EPOA to make decisions that may suit them as well as you but to the detriment of other possible beneficiaries.

Who do you want to receive your SMSF account balance?

• For Spouse / Dependants you should consider using a Reversionary Pension election or Non-Lapsing Binding Death Benefit Nomination direct to beneficiaries or via your will using Non-lapsing Binding Death Nomination to your Legal Personal Representative with option in your will to set up a Testamentary Trust. Normal BDBNs lapse after 3 years.
• For Adult children you can use Non-Lapsing Binding Death Benefit Nomination direct to beneficiary or via your will using non-lapsing binding nomination to Legal Personal Representative with option in your will to set up a Testamentary Trust
• For your parents, your siblings or non-family via your will using Non-lapsing Binding Death Benefit Nomination to your Legal Personal Representative with option in your will to set up a Testamentary Trust
• Do any of the beneficiaries in your Will have special needs? For disabled beneficiaries consider a Special Disability Trust. For those poor with money or in a highly litigious career or in possible bankruptcy then a Testamentary Trust should be considered.

Who do you want to manage your care options if you are incapacitated?

• Ensure you have an Enduring Power of Guardianship in place so that your lifestyle and medical treatment decisions can be made by a trusted family member or friend in the event that you become mentally incapable?
• Do you have an Advanced Healthcare Directive in place in the event that you become terminally ill and are unable to articulate your wishes?
• Have you spoken to your chosen Enduring Guardian so they are clear on your wishes and preferences, explained why you have made those decisions so that they can discuss these with any family members who have cause to question your wishes.

 What to consider in the choice of an Enduring Guardian

• Are they good with making personal decisions under pressure?
• Will there be conflict with other family that they can handle– Sibling rivalry? Blended families?
• Should you consider 2 or more EGs for safety or support

 Information your Attorneys/Executors will need

Bank Accounts and Investments:

• The BSB and account numbers for any accounts or credit cards you have.
• The HIN, SRN of any Personal or SMSF shareholdings and
• Account IDs for Share Brokers, Online Banking and Managed Fund holdings
• Location of property deeds and contact details for Property manager

Insurance:

• Details of policies such as the policy number and type of insurance.
  Life and TPD cover, Motor vehicles, House Insurance, Private Medical Insurance and Funeral Plans

Advisers:

• If you have an accountant, financial planner, lawyer or other professional advisor include their contact details.

Business Records:

• If you have a business include details of where the company records are kept and the computer the ASIC Corporate Key is on.

Your secret place:
If important documents such as certificates of property title, jewellery and other valuables or personal items are being held in safe custody elsewhere or stashed in the attic then you should identify the location.

Your digital life:

• Include all your email login in details and loyalty scheme account details. This includes your membership to social media and cloud data sites so your executors and family may be able to access your on-line data, including books or music files.
• Appoint a Legacy Contact if you use Facebook.
• Instructions on what is and isn’t to be shared with family

Direct Debits:

• If you have any direct debits in place you should include details so that they can be cancelled pending a grant of probate.

Superannuation:

• Do you have other superannuation accounts. Your most recent superannuation statement(s) should also be included. If it is self-managed super the financial statements should be included.

IMPORTANT POINT: Talk regularly to your Executors and Powers of Attorney and Enduring Guardian
Discuss your wishes in terms of lifestyle, healthcare and treatment options with your chosen Attorney and Guardian and if possible with the broader family and make sure that they understand your wishes. Australian’s are very reluctant to talk about illness or death but it is essential to ensure your wishes are followed and to avoid family conflict.

As I mentioned at the start this list is not exhaustive so please add your own tips or suggestions in the comments section below.

I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.