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Power of attorney could breach new legislation
Victorian powers of attorney must understand new legislation prohibits attorneys from entering into conflicted self-managed super fund (SMSF) transactions unless they have obtained prior consent, a solicitor has warned.
Conflicted transactions are those which do or have the potential to bring the attorney's duty to the principal into conflict with the interest of the attorney, Townsends Business and Corporate Lawyers solicitor, Julie Hartley said.
Hartley said a principal/member will have to carefully consider from the outset how much flexibility and power in relation to their super fund they wish to give their attorney.
"[Then], the enduring power of attorney documentation must be drafted to expressly outline which potentially conflicted transactions the attorney is authorised to enter into on behalf of the principal," Hartley said.
"If the attorney is unable to demonstrate they had the prior consent of the principal, their actions could potentially be found in breach of the new legislation and held to be invalid."
Hartley said situations not uncommon in the SMSF context but are likely to involve a conflict are:
- the attorney making a binding death benefit nomination for the principal (as member of a super fund) in favour of the attorney;
- the attorney amending the nomination to remove beneficiaries (such as children of the principal from a previous marriage) and nominate the attorney in their place; or
- the attorney cashing out the principal's benefit before their death (e.g. may be tax free now but taxable if distributed after death).
The recent changes to the law for enduring powers of attorney were made in Victoria on 1 September. However, Hartley said nothing needs to be done in relation to existing enduring powers of attorney as these are grandfathered under the new legislation and remain valid.
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