A guide to superannuation and powers of attorney

Powers of attorney represent a complex and challenging area for superannuation funds. DLA Piper's Heather Gray and Jodi Preston provide a guide to some of the realities likely to confront trustees.

It is not uncommon for trustees of APRA-regulated superannuation funds to be presented with powers of attorney (POAs) signed by members.

A member may have executed a POA in favour of family members, advisers or friends. Those attorneys may then need to rely on their appointment to exercise the rights of the member in relation to the superannuation fund. 

Although POAs are in common use, and often relied upon in both domestic and commercial life, they tend to be poorly understood in the superannuation context.

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As a result, problems arise where the wrong type of POA has been prepared, the drafting is inadequate, or a trustee, a member or an attorney (or all of them) have misunderstood their powers and responsibilities.

These errors can have serious consequences and require expensive and time-consuming steps to fix, particularly where the principal has since lost legal capacity and there is no ability to have a replacement document signed.

Types of powers of attorney

There are several types of POA.  This article focuses on enduring powers of attorney (EPOAs), under which a ‘principal’ appoints an ‘attorney’ to do anything that the principal can lawfully authorise an attorney to do (subject to any limitations expressed in the EPOA document).

The EPOA can therefore extend to any decisions and actions relating to the legal and financial affairs of the principal. (In some jurisdictions, it can also extend to certain personal care or health care matters.) 

Importantly, EPOAs continue to be effective where the principal loses legal capacity. 

Making an effective EPOA

Each Australian jurisdiction has legislation that governs the making and operation of EPOAs. The rules vary significantly between jurisdictions and are beyond the scope of this article.

Most jurisdictions have a ‘standard form’ EPOA which can be downloaded from the internet. The ease of doing this, however, can lead people to assume, wrongly, that completing an EPOA is a simple matter that can be done without advice.

EPOAs in the superannuation context

There are significant issues for a superannuation fund member who loses legal capacity.

First and foremost, some arrangement needs to be made so that the member’s interest in the fund can be managed and, if necessary, appropriate actions taken. These could include:

• making a contribution 
• withdrawing a benefit
• rolling over or transferring benefits to another fund
• commencing or ceasing a pension
• changing a reversionary beneficiary
• varying pension payments
• selecting an investment option, and
• making, revoking or varying a binding death benefit nomination.

Some of these actions can readily be undertaken by an attorney pursuant to an EPOA, but others can present considerable difficulties.

For example, there are different views as to whether, and to what extent, an attorney can make, revoke, confirm or amend a binding death benefit nomination.

Many trustees appear to have concluded that the safest course is generally to decline to accept such purported actions from attorneys, and to accept only nominations executed by the member themselves.

However, this is not always so, as evidenced in a matter before the Superannuation Complaints Tribunal, in which both the relevant trustee and the Tribunal accepted that the attorney had power to make a binding death benefit nomination under an EPOA .

The difficulty for trustees is that an attorney may be seeking to do something that will benefit themselves, while it is a fundamental duty of attorneys to refrain from doing things in reliance on their powers that will result in them receiving a personal benefit (unless the document expressly allows this). 

What should a trustee do, therefore, if an adult child holding an EPOA seeks to cancel a binding death benefit nomination in favour of the fund member’s spouse, and to make a new nomination in favour of themselves?  Such a situation seems certain to be headed for the Superannuation Complaints Tribunal at the very least.

If the trustee accepts a ‘dealing’ made by the attorney, and it is not clear that the relevant EPOA provides the authority to do so, there is a risk that a potential beneficiary or other person interested in the matter may seek to challenge that acceptance.

As the purpose of making and lodging a binding death benefit nomination is to put the disposition of a member’s death benefit beyond doubt, there seems to be little advantage in taking a course which seems likely to be subject to challenge.

Similar issues can arise in other contexts as well. For example, trustees would certainly be uncomfortable with any purported action by an attorney that would result in removing or adding someone as a reversionary beneficiary where this would potentially improve the situation of the attorney themselves. 

In order to address these issues, a principal who intends their attorney to ‘deal’ with their superannuation very broadly, including by taking actions that might benefit the attorney, should include wording in the EPOA that makes it clear that such steps are within the attorney’s authority.

Conclusion 

EPOAs are more complex than is generally acknowledged, and members are invariably reluctant to spend the time (and legal fees) necessary to ensure that they are drafted correctly and appropriately.

However, a well-drafted EPOA can be an important part of every member’s overall planning for the management of their affairs, and can stand them in good stead as regards their superannuation arrangements should illness or incapacity strike.

 From a trustee perspective, it will be much easier to manage activity initiated by attorneys who are operating from a carefully prepared EPOA than from a simple ‘one size fits all’ document.

Heather Gray is a partner with law firm, DLA Piper. Jodi Preston is special counsel with the firm.