Trustees: Appointment and removal Flashcards
Difference between trustees in testamentary, commercial and charitable trusts?
Testamentary:
Trustee must comply with the terms of the trust.
Commercial:
They will often have professional trustees.
Unlike lay trustees, they are paid to perform their role.
Will be held to a much higher standard of care than lay trustees.
Charitable:
The extent to which the trustees are involved in the active, day-to-day, management of the charity will depend on the size of the charity.
What is the process of appointing a NEW trustee in an inter vivos trust?
a) transfer on trust;
- only valid once the settlor transfers legal title to the trustee.
b) self declaration of trust;
- The trust instrument may contain an express power to appoint trustees.
- If there is no express power, or it cannot be exercised, the disclaiming trustee has the power under TA 1925 to appoint their own replacement.
- If the disclaiming trustee does not wish to exercise this power:
a) Beneficiaries with Saunders v Vautier rights have a power to appoint trustees
b) As a last resort, the court has a statutory power to appoint trustees
What is the process of appointing new trustees in a testamentary trust?
When the named trustee is unwilling to unable to act: PR will hold the property on trust until new trustees are appointed.
Look at express power first THEN statutes:
- Named executors want to renounce their position, they have the power to appoint new trustees in their place.
- Trustee has predeceased the testator or is unable to act, the PRS will temporarily become trustees and have the power to appoint permanent trustees.
- Trustee wishes to disclaim the trusteeship, have power to appoint their own replacement.
If the disclaiming trustee does not wish to exercise this power, the PRs also have a power to appoint permanent trustees.
When would the PRs need to appoint trustees?
Testamentary gift to minors:
The PRs or a trustee appointed by them could hold on to the assets and invest them until the minor reaches 18.
AT LEAST 2 trustees must be appointed.
What is the process for appointing new trustees in a subsisting trust ( any disposition of an existing equitable interest) ?
a) By anyone given an express power to appoint trustees by the trust instrument.
b) By current or outgoing trustees.
c) By beneficiaries, using the statutory powers in exercising their Saunders v Vautier rights.
d) By the Charity Commission, in the case of charitable trusts.
e) By the court, as a last resort.
What are the conditions of replacing existing trustees? s36(1) TA
Has to be done by WRITING
By?
- the person named for this purpose in the will or trust.
- OR the continuing trustee(s) or PR.
When?
a) On the death of a trustee.
b) If a trustee is abroad for over a year.
c) If an appointed trustee is a minor or otherwise lacks capacity to act.
d) If a trustee wishes to retire, refuses to act or is unfit to act.
What are the conditions of appointing additional trustees? s36(6) TA
Has to be done by WRITING
By?
- the person named for this purpose in the will or trust.
- OR the continuing trustee(s)
Would a trust ever fail due to the lack of a trustee?
No, the court can make the appointment instead.
(The same goes for the charity commission in a charitable trust.)
a) The court should consider the expressed wishes of the settlor or testator
b) The court should not appoint a trustee where there is a dispute between the beneficiaries as to whether that person would be appropriate.
c) Consider whether the appointment will promote or impede the trust administration.
PS! Appointment of trustee for a corporation will also need renumeration and will have the same powers as OG trustee.
How do we conduct the removal of trustees?
a) express powers;
Powers to remove a trustee vested in the trust instrument
b) Statutory power of replacement.
c) court or charity commission:
The court has the power to replace trustees in cases where the trustee is bankrupt, lacks capacity or is a company which is in liquidation or has been dissolved.
Also when they act dishonestly.
How do trustees retire?
a) Voluntary retirement
meaning without being replaced IF:
- The trustee signs a deed declaring an intention to retire.
- After the trustee retires at least two trustees (or a trust corporation) remain.
- Written consent by deed of the cotrustees is obtained.
- Any action required to vest the trust property in the remaining trustees is carried out.
b) at the direction of the beneficiaries:
with Saunders v Vautier rights beneficiaries have the power to compel a trustee to retire
from the trust. The direction must be made in writing and requires the agreement of all beneficiaries.
