How to protect your SMSF against stroke and dementia


Published on

If you have a self-managed super fund, you need to plan ahead to ensure that it can still keep going if you lose mental capacity due to dementia or other reasons such as a stroke.

Otherwise the fund's assets and operations could be frozen, resulting in losses from being unable to buy or sell investments at the right time, control of the fund falling into the wrong hands and even the loss of complying fund status with serious tax consequences.

Here are nine things you can do to protect your SMSF from your incapacity:

smsf dementia stroke

1. Talk to your financial adviser about what you want to see happen if you lose mental capacity. Think about who should be in control, what should happen in terms of investment strategy and ongoing management, whether the fund should be wound up, what should happen in terms of your death benefits, and so forth.

2. Put into place an enduring power of attorney, to appoint someone who you trust to be able to handle your financial affairs and to be able to be appointed in your place as a trustee of the fund.

3. Check the trust deed to ensure that it allows for your enduring attorney to be appointed in your place and if it doesn't then have it updated accordingly.

4. Put into place written instructions outlining that you want your enduring attorney to be appointed in your place, and what their roles and responsibilities will be and what specific instructions you may wish to give them.

5. Appoint one or more substitute or back-up enduring attorneys. Ideally they should be younger than you (such as one or more trusted children).

6. Put into place an investment strategy that clearly sets out what should happen, both before and after one or more members of the fund lose capacity.

7. Put into place a corporate trustee rather than individual trustees, as this will make things much easier if you lose capacity.

8. Put into place a non-lapsing binding death benefit nomination.

9. Make sure your will is properly updated, because once you lose capacity you can no longer make or change a will.

Get stories like this in our newsletters.

Brian Hor is special counsel specialising in superannuation and estate planning with SUPERCentral.

Further Reading