Key considerations for estate planning when it comes to SMSFs:

1. Legal presumption of capacity and evidentiary thresholds

Capacity is not just an issue for succession lawyers. As the population ages and more and more people are living with dementia related diseases, the chances of meeting someone with a dementia-related disease, questionable capacity, or even finding yourself in a situation where you suspect elder abuse is likely to increase with time.

The law presumes that a person has capacity and proving incapacity requires the rebuttable of this presumption which may be achieved via a medical report.

It is important to understand that capacity is both time and decision specific. For example, with Sundowner syndrome, a dementia sufferer may have more capacity earlier in the day and a gradual decline during the afternoon and evening.

Further, capacity is decision specific so a person may have capacity for simple decisions such as what to wear or purchasing basic groceries but may not be able to understand the operation of a trust.

In terms of red flags around capacity, while age is a consideration and there is evidence which supports that dementia related illnesses are more prevalent the older you get, there are other issues such as other underlying health conditions, taking certain medications and having short-term memory issues.

On the issue of short-term memory, sometimes a person may articulate themselves well in respect of things that have occurred a long time ago and an example of this might be having a good recollection of the establishment of their SMSF but not recalling recent changes to that structure.

2. Substitute decision-making and enduring powers of attorney (EPOAs)

The purpose of an EPOA is to appoint a substitute decision maker if at any point in your life you can’t speak for yourself, whether due to an accident or illness.

Not having an EPOA can create major issues including the need to apply to the Queensland Civil and Administrative Tribunal (QCAT) to have a guardian or administrator appointed, who may be someone you would never have chosen, or you could even end up with an Adult Guardian who is a complete stranger and they will charge for their services.

For those with SMSFs, EPOAs are important because if you lose capacity and can’t act as a trustee or director anymore, your attorney can step in and ensure the fund remains compliant.

3. Elder abuse: legal definitions and prevalence

There is no agreed definition of elder abuse, however, the World Health Organisation have a widely accepted definition:

"Elder abuse is a single or repeated act or lack of appropriate action, occurring withing any relationship where there is an expectation of trust, which causes harm or distress to an older person."

When choosing an age to define ‘older’ people, 65 years is commonly used, however different state and commonwealth programs may have differing age eligibility criteria.

Organisations may also have their own age-related criteria. For example, Seniors Rights Victoria assist people aged 60 and over and Indigenous Victorians aged 45 and over.

According to the AIFS National Elder Abuse Prevalence Study (2020), the most common type of abuse found in the Study was:

• Psychological abuse (11.7%)

• Neglect (2.9%)

• Financial abuse (2.1%)

• Physical abuse (1.8%)

• Sexual abuse (1%)

The AIFS study found that around 1 in 6 or 598,000 older people living in the community had experienced elder abuse in that particular year. The figures suggested that just under half a million older Australians suffered psychological abuse:

• 471,300 (12%) had experienced psychological abuse in the past year

• 115,500 (2.9%) had experienced neglect in the past year

• 83,800 (2.1%) had experienced financial abuse in the past year

• 71,900 (1.8%) had experienced physical abuse in the past year

• 39,500 (1.0%) had experienced sexual abuse in the past year

These statistics highlight the alarming prevalence of elder abuse, underscoring the urgent need for continued awareness, prevention efforts, and support systems to protect vulnerable older individuals and the importance of practitioners being aware of the warning signs.

4. Professional responsibilities and practitioner liability

Legal practitioners have an ethical duty to identify and mitigate elder abuse risks, particularly in estate planning and SMSF structuring. Failure to exercise due diligence in detecting financial manipulation or undue influence may result in professional negligence claims.

5. Superannuation law and estate planning implications

SMSFs require each member to be a trustee/director. If a member loses capacity or dies, immediate action is necessary to maintain compliance. The legal personal representative may act in place of the incapacitated trustee, ensuring fund continuity. Absence of a valid Will or EPOA can create governance gaps, exposing the estate to legal disputes and regulatory penalties.

By proactively addressing these concerns and ensuring that enduring powers of attorney are in place, legal practitioners can help prevent complications and support clients in maintaining their autonomy and financial stability, even in the face of diminished capacity.