Most SMSFs are set up by people in their 40s and 50s who are healthy, busy and in charge. Most SMSF succession problems happen 20 or 30 years later, when one of those people has a stroke, develops dementia or dies, and the family discovers that nobody can sign for the fund, the bank won't release money, or the person now in control isn't who the member would have chosen.
None of this is hard to plan for. It just has to be done while everyone can still sign. This guide explains what happens to an SMSF when a member loses capacity or dies, how an enduring power of attorney fits in, why the trustee structure matters, and what a sensible succession file looks like. It's general information. Enduring powers of attorney, wills, nominations and deed changes are legal documents prepared by a solicitor. Decisions about pensions or winding up are financial product advice from a licensed adviser. We coordinate the plan and keep the fund compliant.
What happens to an SMSF if a member loses capacity?
Super law requires every member to be a trustee, or a director of the corporate trustee. A person who has lost mental capacity can't properly act as either. Unless someone steps in, the fund can't make decisions, may not be able to sign bank or investment instructions, and can drift out of compliance.
Super law allows for this. Under the SIS Act, a member's legal personal representative can be a trustee or director in place of the member. The ATO's ruling SMSFR 2010/2 confirms that this includes a person holding an enduring power of attorney for the member.
What that means in practice:
- the attorney is appointed as trustee, or as director of the trustee company, instead of the member
- they act for the fund as a trustee, with the same duties to every member as any other trustee
- the fund keeps meeting the SMSF definition, so it doesn't need to restructure or wind up.
Can an enduring power of attorney act as SMSF trustee?
Yes, if the right documents are in place and the appointment is actually made. The steps:
- A valid enduring power exists, made on the right form for your state or territory, with the witnessing that state requires. Forms and witnessing rules differ between states and territories, and they do change, so an old form isn't automatically still right. Your solicitor handles this.
- The power covers the decision. Some enduring powers are limited, or only start on incapacity and need evidence of it. Check the wording before you need it.
- The deed or constitution allows the appointment. The SMSF deed (individual trustees) or the company's constitution (corporate trustee) must provide a way to appoint the attorney. Most modern documents do, but older ones can be awkward.
- Formal appointment. A trustee resolution or director appointment, with the attorney's written consent. Our director resolutions agent drafts appointment and resignation resolutions checked against the constitution; your accountant reviews them before anyone signs.
- Compliance paperwork. The attorney signs the ATO trustee declaration within 21 days. A new director needs a director ID before being appointed. Notify the ATO of the change within 28 days, and ASIC within 28 days for a company director.
- Bank and investment platforms updated with new signatories.
Watch out: The attorney must act for the fund and all its members, not just the person who appointed them. If the attorney is also a beneficiary, for example an adult child, that conflict needs managing. Keep minutes that show decisions were made for the fund's purposes.
Corporate trustee or individual trustees: which handles succession better?
| Situation | Individual trustees | Corporate trustee |
|---|---|---|
| A member loses capacity | Attorney becomes an individual trustee; every asset's title, share registry and bank account may need changing | Attorney becomes a director; assets stay in the company's name |
| A member dies | Remaining trustees, or executor in the member's place; asset titles may need changing again | Directors change; ownership of assets doesn't |
| Only one member left | Must have at least two individual trustees, so someone else has to join | A single member can be the sole director |
| Penalties for breaches | Administrative penalties can be imposed on each individual trustee | One penalty for the company, which directors are jointly liable for |
| Who ends up in control | Whoever is appointed under the deed, often decided by the remaining trustees | Whoever controls the company's shares and board, under the constitution and the will |
| Cost | No company to maintain | ASIC fees and company records each year |
For succession, a corporate trustee is usually the stronger choice. The assets don't move each time a person does. Our guide to corporate trustees vs individual trustees covers the switch.
What happens when an SMSF member dies?
When a member dies, two things have to happen, on separate tracks: the fund must pay out the member's benefit, and the trustee structure must be fixed.
| When | What needs to happen |
|---|---|
| First weeks | Tell the bank and platforms. Collect the death certificate. Find the will, any binding nomination and any reversionary pension documents |
| Before any payment | Value the member's interest. Confirm whether a reversionary pension continues automatically. Check the nomination is valid under the deed. See death benefit nominations |
| As soon as possible | Pay the death benefit to the person or people entitled. Super law requires death benefits to be paid as soon as practicable, as a lump sum, a pension to an eligible dependant, or both |
| Within 6 months | Fix the trustee structure if the fund no longer meets the SMSF rules: appoint a new trustee or director, move to a corporate trustee, or wind up |
| Within 28 days of any change | Notify the ATO of trustee or director changes (and ASIC for company directors). New trustees sign the trustee declaration within 21 days |
| 12 months after death | A reversionary pension is credited to the survivor's transfer balance account at its value on the date of death. If it takes them over their cap, the excess must be commuted and paid out of super. Lodge the TBAR early so they can plan |
| Year end | Final pension minimum for the deceased, the fund's annual return, and the audit |
From the member's death until death benefits start to be payable, the deceased member's executor (legal personal representative) can act as trustee or director in their place. Once the benefits become payable, that basis for their role ends, so plan who will hold the role after that.
Who controls the fund after a member dies?
This is where families get hurt. Control of the fund and entitlement to the money are separate questions, and the person in control can sometimes decide the money question too.
In a well-known 2005 NSW case, Katz v Grossman, a father's SMSF had two trustees: himself and his daughter. He'd left a non-binding nomination and a will intended to split his super between his son and daughter. After his death, the daughter appointed her husband as co-trustee and the two of them paid the entire benefit to her. The court upheld it. The father's documents didn't bind the trustees, and the trustees were acting within their powers.
Three things would have changed that outcome:
- a valid binding nomination, which the trustees must follow
- clear rules in the deed about who becomes trustee after a member's death
- careful thought about who sits on the trustee board, especially in a blended family or where one child is a trustee and another isn't.
With a corporate trustee, control comes from the company's shares and directors. Your shares in the trustee company pass under your will. If your will doesn't deal with them, they go wherever the residue goes, and that person can appoint the board. Some constitutions let a sole director nominate a successor director. Make sure the will, the constitution and the deed point the same way.
Single-member and couple funds: the specific risks
Couple funds are the most common SMSF, and the most predictable succession problem: one spouse dies, and the survivor is left alone in the fund.
- With individual trustees, the survivor needs a second trustee within six months, or should move to a corporate trustee with themselves as sole director.
- With a corporate trustee, the survivor can continue as sole director. Nothing else needs to change structurally.
- If the deceased spouse's pension was reversionary, it continues to the survivor. Check whether it pushes the survivor over their transfer balance cap or above the $3 million Division 296 threshold.
Single-member funds have an extra problem when the last member dies: there's nobody left with authority. The executor needs to be in a position to act quickly, usually after probate, so that the fund can pay the benefit and wind up. Make sure the executor knows the fund exists, where the documents are, and who the fund's accountant is.
What does an SMSF succession plan look like?
A good succession plan fits on a few pages and lives in the fund's records. This is what we check:
| Document | What to confirm |
|---|---|
| Trust deed | Current; allows non-lapsing nominations, reversionary pensions, attorney and executor appointments; clear rules for appointing and removing trustees |
| Trustee company constitution | Allows attorneys and executors to act for shareholders; successor or alternate director provisions; one company acting for the SMSF only |
| Share register | Who owns the trustee company's shares today, and who will after each member's death |
| Enduring power of attorney (each member) | Valid in their state, enduring, covers financial decisions, names someone willing and able to act as trustee |
| Will (each member) | Executors named; trustee company shares dealt with specifically; consistent with the super plan |
| Binding death benefit nomination (each member) | Valid under the deed, signed while the member has capacity, still fits the family |
| Reversionary pension documents | Recorded at the start of each pension; consistent with the nomination |
| Instructions for the family | Who to call, where the documents are, which bank and platforms the fund uses |
Our estate planning agent checks wills, powers of attorney and death benefit nominations for gaps; your accountant reviews the findings with you and briefs your solicitor on anything that needs fixing.
Mistakes we see
- No enduring power of attorney for one or both members, so a stroke stops the fund in its tracks.
- A general power of attorney only, which ends on incapacity.
- Attorney never formally appointed, so they sign documents they have no authority to sign.
- Individual trustees in a couple fund, so a death means retitling every asset and finding a second trustee.
- Trustee company shares forgotten in the will.
- Nominations left until a diagnosis, when capacity is already in question.
- A child as co-trustee in a blended family with no binding nomination.
- Executor unaware the SMSF exists until months after the death.
- No plan for a reversionary pension that takes the survivor over their transfer balance cap.
How BPAG helps with SMSF succession
We prepare SMSF financial statements, member statements and annual returns, coordinate the independent audit with an approved SMSF auditor, and keep an eye on compliance all year. Succession is part of that. See our SMSF accounting and audit service.
- Succession review: we map who controls the fund and who receives each member's benefit if a member loses capacity or dies, and show you where the documents disagree.
- When it happens: we prepare the trustee resolutions, director changes, trustee declarations and ATO notifications, calculate the death benefit and its tax, and lodge the TBARs.
- Coordination: we brief your solicitor on the legal documents and your licensed adviser on pension and payment decisions. Our meeting file note agent writes up family meetings so nothing agreed is lost; your accountant confirms the notes.
Agents draft, qualified accountants review and sign off, and nothing is lodged or sent without a person approving it. Enduring powers of attorney, wills, BDBNs and deed changes are prepared by a solicitor, and financial product advice comes from a licensed adviser (AFSL holder). If your SMSF is one part of a wider family plan, our succession and estate planning service and estate planning checklist cover the rest. If running the fund is becoming too much, read about winding up an SMSF or the honest comparison of SMSFs and industry funds.
Frequently asked questions
Can an ordinary power of attorney be used to run my SMSF?
Not when it matters most. A general (non-enduring) power of attorney ends when you lose capacity. Super law only lets an attorney replace you as trustee or director if they hold an enduring power of attorney. Check that your power is enduring and made on the right form for your state.
Does my attorney automatically become a trustee when I lose capacity?
No. The attorney must be formally appointed as trustee, or as a director of the trustee company, under the trust deed or the company's constitution. They must consent, sign the ATO trustee declaration within 21 days, and have a director ID before becoming a director.
Can my attorney make or change my death benefit nomination?
Don't rely on it. It depends on your deed, the terms of the power and state law, and courts have reached different outcomes. In one NSW case, nominations signed by financial managers for a person who had lost capacity were held to be void. Make or update your own nomination while you have capacity.
How long does an SMSF have to sort out its trustees after a member dies?
If the fund stops meeting the SMSF trustee rules because a member has died, it has six months to fix the structure, for example by appointing a new trustee, moving to a corporate trustee or winding up. Trustee changes must be reported to the ATO within 28 days.
Who owns the trustee company's shares when I die?
Your shares in the trustee company pass under your will like any other shares. Whoever ends up with them can appoint and remove directors, and so controls the fund. Deal with those shares specifically in your will, and check what the constitution says about successor directors.
Should our SMSF wind up when the first of us dies?
Not necessarily. Many funds continue with the surviving spouse, especially with a corporate trustee and a reversionary pension in place. Winding up can make sense if the survivor doesn't want to run the fund or would struggle to. That's a decision for the survivor with a licensed adviser, ideally discussed long before it's needed.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.