An enduring power of attorney is crucial for ensuring continuity and compliance, says a professional adviser.
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Grant Abbott, LightYear Group chair, director, and founder, said when considering the importance of an enduring power of attorney (EPOA) in Australia, it's vital to understand its role and implications.
“For SMSFs in particular, it allows the nominated person to step into the trustee’s shoes if they are incapacitated, ensuring the continuity and compliance of the SMSF,” he said.
Mr Abbott said there are five key reasons for anyone – not just those with SMSFs – to have an EPOA.
“Imagine a situation where an adult daughter has a severe accident and is incapacitated. Her parents, attempting to manage her finances, approach her bank for assistance,” he said.
“Without an EPOA in place, the bank is unable to comply due to legal constraints. This scenario highlights the critical need for an EPOA.”
Without an EPOA, SMSFs can face a number of practical and legal barriers, he said.
“As illustrated in the case above, there is the inability of the bank to act on behalf of the incapacitated daughter which demonstrates the challenges and delays that can arise in managing essential financial affairs,” he said.
“This is crucial in cases of sudden illness or accidents, ensuring that bills, loans, and investments are handled properly.”
Second, an EPOA will also allow a nominated person to make medical and lifestyle decisions.
“Beyond financial matters, an EPOA can cover health and lifestyle decisions, ensuring that one's personal wishes are respected and followed,” he added.
They will also allow for legal recognition across all states and although in Australia they are state-based, Mr Abbott said EPOAs are generally recognised across different states, which is important for individuals with assets or interests in multiple locations.
“They can also safeguard against abuse, and having a formal EPOA can protect against financial abuse,” he said.
“By choosing someone trusted, one ensures that their affairs are managed ethically and responsibly.”
He concluded that an EPOA is a vital legal tool that ensures an individual’s financial and personal matters are managed according to their wishes, even when they are unable to do so themselves.
“It provides peace of mind, not just for the individual, but also for their family, knowing that there's a plan in place for unforeseen circumstances,” he said.
“As such, it is a crucial element of financial and personal planning in Australia.”
Keeli Cambourne
28 November 2023
smsfadviser.com
