APPOINTMENT, RETIREMENT, AND REMOVAL OF TRUSTEES Flashcards
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Original Trustees
- The trustees are usually appointed by the settlor in the trust instrument. If not, the court can appoint trustees.
- A trustee must have notice of the trust and expressly or impliedly ac-cept the office of trustee. They are not obliged to accept the trust, and before acceptance, a trustee can disclaim or refuse appointment for any reason.
- However, a trustee cannot accept a trust in part and disclaim it in part.
Numberof Trustees
There is** no minimum number **of trustees, but if the trust property is land, at least **two **trustees or a trust corporation are required to give a valid receipt for capital money arising
on sale of the land. The maximum number of trustees for a trust of land is four. There is no maximum for a trust of pure
personalty.
Subsequent Appointment
Once the trust has been created, the settlor does not have power to appoint new trustees unless there is an express provision in the trust instrument giving the settlor such pow-er.
Additional Trustees
- Unless a trustee is a trust corporation, a person may be designated in the trust as having the power to appoint additionaltrustees;
- otherwise the existing trustees have this power.
- However, this power may not be used to increase the number of trustees to more than four, even if the trust property doesnot include land.
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Replacement Trustees
a.When Appointed
One or more new trustees may be appointed to replace a trustee who:
*Dies;
*Refuses to act;
*Remains outside the UK for a continuous period exceeding 12 months;
*Is unfit to act (for example, by committing a breach of trust or by being a bankrupt);
*Is incapable of acting (for example, by mental incapacity or infrmity); or
*Desires to be discharged.
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Replacement Trustees
b.Who May Appoint
The appointment of a replacement trustee must be made by
*The person named in the trust instrument (if any); or if none,
*The surviving or continuing trustees; or if none,
*The personal representatives of the last surviving trustee; or if none,
*The court.
1. The appointors are not obliged to replace all outgoing trust-ees, but they may do so. They may also use this power to increase the number of trustees, subject to the maximum num-ber of 4 trustees for a trust of land.
2. Although a retiring trust-ee should be allowed to help choose the new trustee (if thetrustees are appointing the replacement), a trustee who hasbeen removed cannot participate.
3. The appointment must be made in writing but need not be made by deed.
4. Even though not necessary, a deed is commonly used, as it will operate to vest legal title to land and chattels in the new trustees.
Power of Benefciaries
- Beneficiaries have no general powers to control the trustees unless a breach of trust has been committed.
- However, under certain circumstances the beneficiaries have the power to select trustees. The power applies where:
*There is** no person nominated** in the trust instrument to appoint new trustees;
*The beneficiaries under the trust are of full age and capacity, and taken together, they are absolutely entitledto the trust property (note that in these circumstances the beneficiaries could, if they wished, agree to end the trust and divide the trust property between them); and
*The benefciaries act unanimously. - If these requirements are satisfied, the beneficiaries may, by written instruction, order one or more of the existing trustees to retire and order the existing trustees to appoint a new trustee or trustees of the benefciaries’ choice.
EXAMPLE
Trustees are holding property on trust** for Lucy for life with remainder to Robert**. The trust instrument does not give any special powers to appoint trustees. Both Lucy and Robert are over 18 and of sound mind. Taken together, Lucy and Robert own the whole equitable interest. They may direct the existing trustees to retire and appoint new trustees of Lucy and Robert’s choice. (Alternatively, Lucy and Robert could agree together to end the trust. They could instruct the trustees to distribute the trust property to them in what-ever proportions they might agree.
COMPARE
Trustees are holding property** on trust for Len for life with remainder to Ruth, provided Ruth is living at Len’s death**. The trust instrument does not give any special powers to appoint trustees. Both Len and Ruth are over 18 and of sound mind.Taken together, Len and Ruth are not absolutely entitled to thetrust property. Ruth’s interest is contingent on her surviving
Len. If Ruth dies before Len, her interest will fail. If the trust in-strument does not make provision for this possibility, there will be a resulting trust for the settlor, or his estate if he is dead.Therefore, power to select new trustees does not apply.
Power of the Court
The court has the express power to make an order appoint-ing new trustees either in substitution for or in addition to existing trustees whenever it is expedient to do so
EXAMPLE
The two trustees of a discretionary trust cannot agree on the manner of distribution of the funds. Neither is prepared to resign. Either trustee or any adult member of the class of potential benefciaries could apply to the court under this provision. The court could remove either or both trustees and appoint new trustees to replace them. It is not neces-sary to show that either of the trustees has committed any breach of trust, but merely that it is in the interests of the beneficiaries for the trustee to be replaced.
RETIREMENT
- A trustee may retire from office without being replaced provided that: (1) they obtain the consent by deed of all their co-trustees and the person (if any) given power to appoint new trustees by the trust instrument; and (2) they leave in office** at least two trustees or a trust corporation**.
- Alternatively, a trustee wishing to retire may do so by procuring the appointment of a new trustee or trustees in their place on the basis that they “desire to be discharged”.
