14.12.16

By Katherine Miller

When setting up a Trust one of the biggest considerations is who the Trustees will be. It’s very important to select the right people and we have given some helpful advice in our previous blog post on what you need to consider in this process. As a Trust can last for up to 125 years, it might be necessary at some point to change Trustees, this blog outlines the process you would go through to complete this.

Who are the current Trustees?

The starting point is to check the Trust document, this might be a Will or a separate Trust Deed, to see who was appointed.  Then check if anything has happened since the Trust started i.e. death of a Trustee, retirement or replacement of a Trustee.  Any changes should be recorded in writing and should all be stored together.

Appointing a Replacement or Adding Trustees

Firstly, read through the Trust document to see if there are any specific provisions about appointing new Trustees.  It might give power to a certain person to be able to appoint or change the Trustees and, if so, this will need to be followed.

However, if there are no specific provisions or the person nominated in the Trust document is unable or unwilling to act then the general rules regarding appointment are set out in the Trustee Act 1925.  This states that the other remaining Trustees can appoint replacement or additional Trustees.  If there are no Trustees alive then the Personal Representative (PR) of the last surviving Trustee can appoint the Trustees. This means that a Trust can never be without a Trustee or Trustees to administer it.

Retirement of a Trustee

As previously mentioned a Trustee can retire if they are replaced by a new Trustee or they can retire provided there are at least two Trustees or a Trust Corporation remaining.

It is important that the retirement of a Trustee is recorded in a deed and the outgoing Trustee needs to ensure that they transfer the trust assets over to the continuing Trustees.  They may need to sign documents to transfer assets over.

What if a Trustee loses Mental Capacity?

This can create a difficult situation for the management of a Trust as a Trustee continues in their position until they are removed.  Most Trusts provide for the Trustees to act unanimously in managing the Trust and this won’t be possible where one Trustee does not have the required mental capacity to make decisions.

In this situation, the Trust document may state how a Trustee without mental capacity can be removed or, if no provisions are made, the continuing Trustee (or the PR of the last surviving Trustee) can remove them.  It is essential that the incapacity of the Trustee has been established before any action is taken to remove them, for more information about mental capacity take a look at our recent blog here.

There are situations where the approval of the Court of Protection is required to remove a Trustee, particularly where the Trustee in question has a beneficial interest in the Trust.

Removing a Trustee

It is rare but there are occasions where a Trustee refuses to retire even when it may not be appropriate for them to continue acting, for example in cases where there is evidence of misconduct by the Trustee or failure to carry out their duties.

It is possible to apply to the Court for the removal of the Trustee by Court Order but this needs careful consideration due to the potential costs that may be incurred and the effect it may have on the various people involved.

When dealing with any changes to the Trustees, you need to ensure that the correct legal processes are followed.  Failure to do so could result in an invalid change and Trustees who thought they had retired may still be liable for the acts of the new Trustees.  If you have a Trust and are considering changing the Trustees or are thinking of setting up a Trust, please do get in touch.