Appointment, removal and retirement of trustees

Question 1

Who are trustees appointed by in an express trust?

Answer 1

Settolor when the trust is first established

but trustees can change over time

Question 2

Who can be a trustee?

Answer 2

any person except a minor

Question 3

What are the considerations when selecting a trustee?

Answer 3

Conflicts of interest

Whether it more than one trustee should be appointed - if more than one consider conflicts and subsequent administrative difficulties

The number reuqired for a trust:
- for a trust of land = maximum of 4 trustees
- for good reciept sometimes need 2

The trust instrument requirements and restrictions on who may act as a trustee

Question 4

When appointing trustees in an inter vivos (lifetime) trust what 2 options does the settlor have for appointing trustees?

Answer 4

A self declaration of trust - meaning settlor will become trustee as long as all the key requirements for declaration of enforceable trust are met

A transfer on trust - meaning the trust is constituted once the settlor transfers legal title to the trustee. Trustee can decline the role. Settlor should only transfer legal title to the intended trustee once they have confirmed they are willing to act.

Question 5

What are the 4 steps for a testamentary trust to take effect?

Answer 5

1. testator names executors in the will. If they are able and willing to act, they take legal title to the testator’s entire estate.
2. The executors administer the estate. This includes ensuring legal title is vested in the intended trustees of the trust
3. Sometimes the same people are named as executors and trustees. In these cases the executors will hold legal title to trust property in their capacity as trustees instead of as executors.
4. If the testator has named someone different as trustee, the executors must transfer the property to them.

Question 6

What happens if the trustee is not willing or able to act?

Answer 6

alternative trustees will need to be appointed. the executors will hold the property on trust until new trustees are appointed.

Question 7

Who appoints trustees in such situations?

Answer 7

They can be appointed in one of the following 5 ways:

1. Using any express powers to appoint trustees found in the trust instrument
2. using statutory powers to appoint trustees
3. by the beneficials exercising their saudners v vaultier rights
4. in the case of charitable trusts, by the charity commission
5. by the court

Question 8

How is this done using the trust instrument?

Answer 8

TI may contain powers to appoint new trustees

settlor can sometimes reserve this power for themselves and retain some control over the trust

Question 9

How are trustees appointed under general statutory powers?

Answer 9

This can be done in the following cases

1. On death of a trustee
2. if trustee is abroad for over a year
3. if an appointed trustee is a minor or otherwise lacks capacity to act
4. If a trustee wishes to retire, refuses to act or is unfit to act.

This power can be exercised by the person nominated in the TI, surviving or continuing trustees.

If all trustees have died the power is exercisable by the PR of the last to die

Question 10

What can beneficiaries do under Saunders v Vaultier to appoint new trustees?

Answer 10

They can exercise their right to change the trustees of the trust by collapsing the trust and creating a new one with new trustees.

s19 of Trusts of Land also gives beneficiaries with rights under saunders v vaultier power to direct the trustees to appoint a new trustee.

This power must be exercised in writing and cannot be exercised in cases where the trust instrument contains an express power to appoint new trustees.

Question 11

What is the purpose of a court power to appoint trustees?

Answer 11

Equity principles will not allow a trust to fail over a want for trustees.

If a trust would be without trustees because there is nobody authorised or able and willing to act then the court can make an appointment instead.

In case of charitable trusts, this power is extended to the charities commission.

Question 12

What factors will the court consider when exercising the power to appoint trustees?

Answer 12

1. Wishes of the settlor or testator expressed in TI
2. Not to appoint a trustee where there is a dispute between the beneficiaries as to whether the person would be appropriate to act as a trustee.
3. If the appointment will promote or impede trust administration. Court should take into account views of existing trustees, but must consider if those views are reasonable.

Question 13

What rules apply to removal of trustees?

Answer 13

The same as for appointment but the rules relate to removal:

1. TI provisions on removal
2. General statutory power
3. Court power
4. Charity commission power

Settlor may reserve power to remove

trustee has to be replaced if bankrupt

Question 14

What are two options for trustees to retire?

Answer 14

Voluntary retirement

and

By direction of the beneficiaries

Question 15

What is voluntary retirement

Answer 15

T retires by deed where there are at least 2 people or one trust corporation to act as trustees and the co trustees and any person with power to appoint

trustees who retire must comply with statutory requirements or they will remain in office.

A trustee who retires who retires should obtain a formal discharge of liability form the beneficiaries.

Question 16

What happens when trustee is retired by direction of the beneficiaries?

Answer 16

Bs with rights under saunders v vaultier have a power to compel a trustee to retire from the trust.

Direction must be made in writing and requires agreement of ALL beneficiaries

Can only take effect if after the retirement there will remain at least two trustees or one trust corporation.