The partner of a legal firm specialising in superannuation has revealed the concept of SMSF member mental capacity is becoming more prevalent in estate planning challenges, prompting the need for practitioners to amend their procedures regarding all fund actions.

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“[It means] we want to make sure we have evidence when we’ve got clients signing important documents, particularly if there is an issue about capacity that might come up later, that they had capacity [at the time of authorisation],” Cooper Grace Ward partner Scott Hay-Bartlem told attendees of the SMSF Association Technical Summit 2024 held in Sydney last week.

Hay-Bartlem warned advisers and accountants this is not as easy a task as would appear on face value, emphasising the importance of understanding all of the subtleties of the issue.

“[A person’s capacity] may come and go. It’s not a matter [of being] set now and never having it again. It might come and go during a day, it might come and go during a week, a month or a year, but you need to make sure when you’re doing something [related to an SMSF] particular people [involved] had capacity on that day,” he noted.

According to Hay-Bartlem, the more practitioners become familiar with addressing capacity issues, the more acute their skill will be and recommended they thoroughly investigate any situation where doubt might exist over a person’s capacity.

“The more [you] deal with clients with questionable capacity, the more you will learn their ‘tells’. [Please note] people with capacity issues become very clever at hiding it,” he said.

“You shouldn’t get a surprise when you find that your client died and the death certificate [includes a diagnosis of] dementia because you should know beforehand.”

He stressed the need for advisers and accountants to also recognise the capacity of a client is not determined by their age.

“Is capacity an issue only for old people? No, capacity can affect younger people [as well],” he said.

July 29, 2024
Darin Tyson-Chan
smsmagazine.com.au