An Enduring Power of Attorney on its own may not allow your attorney to make decisions regarding your family business, family trust or superannuation, as Binay Prasad, (Accredited Specialist) Wills & Estates, explains.

Introduction

An Enduring Power of Attorney is an essential document which appoints your chosen person to make financial and personal decisions on your behalf once you have lost decision-making capacity. The person you appoint is called your ‘attorney’.

An Enduring Power of Attorney on its own may not allow your attorney to make decisions regarding your family business, family trust or superannuation. For example:

If you are in a Director in a company, your attorney cannot automatically step into your role as Director if you lose decision-making capacity;
If you are the Trustee or Appointor of a family trust, your attorney cannot automatically step into those roles if you lose decision-making capacity;
If you hold superannuation (whether through a public fund or through an SMSF), your attorney may be restricted from making decisions on your behalf regarding your superannuation.

Additional documents, or variations to existing documents, may be required to ensure your attorney has comprehensive powers to manage all of your financial affairs if you lose decision-making capacity. Each particular type of asset is discussed in more detail below:

Companies

If you hold shares in a privately owned company, then those shares are your personal property. Your attorney can (subject to the wording of the company constitution) make decisions in relation to those shares if you lose decision-making capacity. Such decisions could include the sale or transfer of the shares, or voting at company meetings.

However, if you hold the position of a Director in your family company, then your attorney cannot automatically act as the Director in your place if you lose decision-making capacity.

If you hold the majority of the shares in the company, then your attorney could, through the voting rights attached those shares, remove you as the Director and appoint themselves, or another person, as a replacement Director (provided this is allowed by the company constitution).

If you are the sole Director and shareholder in the company, then your attorney is authorised to appoint a replacement Director pursuant to s201F of the Corporations Act 2001 (Cth) (provided this is also allowed by the company constitution).

Alternatively, if you would like more certainty as to who will act as the Director in your place if you lose decision-making capacity, you (along with any other Directors in the company) may execute a Deed of Delegation. This is a separate document to an Enduring Power of Attorney. The Deed of Delegation allows for a Director to appoint another person (or persons) to act in their place in circumstances such as where a Director is overseas or has lost decision-making capacity.

Family Trusts

Each family trust will have a Trust Deed, which is a document setting out the rules of the trust, and the positions of control in the trust. Generally speaking, the two most important positions in the trust are the Trustee (who is responsible for the day-to-day management of the trust), and the Appointor (who has the power to appoint and remove the Trustee).

If you hold the position of Trustee and/or Appointor, your attorney cannot automatically step into these roles if you lose decision-making capacity, unless this is allowed by the Trust Deed.

It is therefore very important that the Trust Deed allows your attorney to act if you lose decision-making capacity (or allows an alternate mechanism for the appointment of a replacement Trustee or Appointor). The Trust Deed may need to be amended if it does not have such a provision. This will ensure there will be clarity as to who can act if the Trustee or Appointor loses decision-making capacity.

If the Trustee of your family trust is a company, and you are a Director in that company, then you should ensure that there is a mechanism in place for a replacement Director to be appointed, as outlined above.

Superannuation

It is important that you appoint a person to have the power to make decisions regarding your superannuation, if you lose decision-making capacity. For example, a Binding Death Benefit Nomination (a direction to the superannuation fund regarding who will receive your superannuation on your death) will often lapse after three years. It is therefore important to appoint a person with the power to continue to renew the Binding Death Benefit Nomination, if you lose decision-making capacity.

Your attorney may not automatically have the power to make decisions regarding your superannuation.

This is an evolving area of the law, and there have been a number of conflicting court decisions across different Australian states in recent years. Until the issue is addressed in Victoria through legislation or the Courts, it is recommended that your Enduring Power of Attorney specifically states that your attorney may make decisions regarding your superannuation on your behalf (provided this is what you want).

If you are the trustee of your SMSF, or a Director in the corporate trustee of the SMSF, then superannuation legislation states that your attorney can step into these roles if you lose decision-making capacity (provided this is also allowed by the SMSF Trust Deed)

Conclusion

An Enduring Power of Attorney is an important first step to ensure that you appoint your chosen person to manage your financial and personal affairs if you lose decision-making capacity. However, depending on your assets, additional legal advice and documents may be required to ensure that your chosen attorney has comprehensive powers to manage all of your financial affairs, including your superannuation, family business, and family trust.

How Sharrock Pitman Legal can assist you?

Our team of Accredited Specialists (Wills & Estates) has been advising business owners and individuals on succession planning and estate matters for over 50 years.

If you would like advice in relation to your situation or to plan for the future management of your business or financial assets, please do not hesitate to speak to our Accredited Specialists in Wills & Estates Law. Get in touch with us on 1300 205 506 or email our Wills & Estates team directly.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.‍

Written by a member of our Legal Team

Binay Prasad

For further information contact

Binay Prasad

Binay is a Senior Associate of Sharrock Pitman Legal.

He is an Accredited Specialist in Wills and Estates law, having been accredited by the Law Institute of Victoria. He is part of our Wills and Estates group and deals with Wills and Estates planning and Probate. For further information, contact Binay on his direct line (03) 8561 3329.

What is a Power of Attorney?

An Enduring Power of Attorney on its own may not allow your attorney to make decisions regarding your family business, family trust or superannuation, as Binay Prasad, (Accredited Specialist) Wills & Estates, explains.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.

You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

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(03) 8561 3318

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Family business, trusts and superannuation - what is the role of an Enduring Power of Attorney?

An Enduring Power of Attorney on its own may not allow your attorney to make decisions regarding your family business, family trust or superannuation, as Binay Prasad, (Accredited Specialist) Wills & Estates, explains.