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SUCCESSION PLANNING – MORE THAN JUST A WILL

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Succession planning (also commonly known as estate planning) is not just about the making a Will, it involves many different aspects including planning for incapacity and having an up to date enduring power of attorney.

From when a person starts to lose capacity, to when they no longer have capacity for decisions, is often a gradual process. This means that planning for this eventuality is crucial.

An enduring power of attorney (EPOA) is a document that allows a person (or multiple people) to make decisions on your behalf about your personal affairs and assets. You can appoint attorneys for financial, personal and health matters and they can be the same or different persons.

An attorney’s power under an EPOA for personal and health matters only exists when the Principal suffers incapacity, however an attorney’s power in relation to financial matters can commence immediately (the date the document is signed), on a loss of capacity (normally requiring medical evidence) or on a specified date or occasion.

Examples of financial matters include:

  • selling and buying assets;
  • operating bank accounts;
  • paying debts; and
  • exercising voting rights in relation to shares/units.

A personal EPOA may not be sufficient to deal with control of all entities normally controlled by the individual , (companies, trusts and SMSFs). It is also important to consider how an EPOA affects those entities or how they are to be controlled if the current controllers lose capacity. It is possible for an entity to appoint an attorney under a General Power of Attorney (which has significant differences to an EPOA for an individual).

For many clients these entities s represent a large portion of the value of the persons assets.

If the right people are not appointed to manage these entities there can be disastrous consequences for the principal’s estate and the beneficiaries who are intended to inherit the control and benefit of these entities after the principal’s death or during their disability. If inappropriate persons are appointed to control entities the result could be that the financial benefit of the estate of the principal may not pass to the correct persons.

An inappropriate choice of attorney can also lead to disputes with other parties (such as other directors, shareholders or beneficiaries) as to how the entities assets are being managed if the attorney is involved in a business or the day to day management of the entities.

An inappropriate attorney may also be able to influence how assets held within these structures are distributed during the disability or after the death of the principal .(for example death benefit decisions with SMSFs or discretionary trust distributions) to favor themselves or others.. The appointment of an attorney for an entity under a General Power of Attorney , does not automatically cease on the principals death (even though the EPOA is revoked on death).

It is therefore important to make sure that whoever is appointed as the principal’s attorney or the attorney of an entity, is the correct person and they are trusted to make the right decisions when the principal no longer can.

If you would like to know more, please contact one of our succession team members on 3370 5100

We have assembled a highly experienced, capable team of legal practitioners, committed to delivering you expertise across all legal services. Find your local office: