Trustees: Appointment, Removal and Retirement.

Question 1

Who can be a trustee?

Answer 1

Most adults with mental capacity can be appointed to act as a trustee.

Companies can also be a trustee so long as their constitutional documents authorise them to do so.

Question 2

What is a trust corporation?

Answer 2

Corporate trustees that carry out trust business for profit.

Question 3

What is the minimum number of trustees needed for a trust over land?

Answer 3

2 human trustees or one sole trust corporation.

Question 4

What is the minimum number of trustees a trust has to have over personalty?

Answer 4

They can have 1 sole trustee (but usually recommended there are two).

Question 5

Is the a max number of trustees a trust over land can have?

Answer 5

Yes. There cannot be any more than 4 trustees over land.

Question 6

Can a trust over personalty have more than 4 trustees?

Answer 6

Yes.

Question 7

What is the optimum number of trustees for a trust comprising both land and personalty?

Answer 7

Between 2 and 4 trustees.

Question 8

In the absence of an express trust provision giving this power, explain how a trustee can retire if they are going to be replaced (s36(1) TA 1925)?

Answer 8

Retiring trustee must be replaced by the appointment of a new trustee.

The new trustee must be appointed by either:

1) the person nominated in the trust instrument toexericse the s36 power; but if there is none
2) the continuing co-trustees must make the appointment.

The appointment must be in writing (and if possible by deed).

Question 9

What is the effect of appointing a new trustee buy deed?

Answer 9

The trust property automatically vests in them (apart from company shares and specific other forms of property).

Question 9

Can a trustee retire without being replaced (s39 TA 1925)?

Answer 9

Yes if the following criteria are met:

1) there will be either two trustees or a trust corporation left as trustees; and
2) the trustee retires by deed; and
3) the other trustees consent to the retirement by deed.

Question 9

Is a retiring trustee liable for breaches of trust ?

Answer 9

They remain liable for their own breaches, but not for future breaches (unless they retired to facilitate the breaches).

Question 10

What are the 4 ways a trustee can be removed?

Answer 10

1) in accordance with an express provision in the trust;

2) Under s36(1) TA 1925 (under a statuary ground);

3) Under s41 TA 1925 (through the court); or

4) s19 Notice served on the trustees by the beneficiaries

Question 11

What are the grounds for replacing a trustee under s36(1) TA 1925?

Answer 11

Grounds for replacing trustee:

• trustee is dead;
• trustee remains outside Uk for more than 12 months;
• wants to retire;
• is unfit to act;
• incapable of acting (eg mental or physical incapacity);
• is a minor.

Question 12

Who affects the removal of a trustee (under s36 TA 1925)?

Answer 12

Either:
1) person nominated to do so in the trust; but in absence of this provision either:
- the continuing trustees; or
- if all trustees have died, the PRs of the trustee who died latest.

Question 13

Explain the s41 TA 1925 grounds for rap cling a trustee.

Answer 13

This method is by application to the courts.

Court will replace trustee if it is expedient to do so and it is otherwise inexpedient, difficult or impractical to appoint the new trustee without court assistance.

Court makes appointment following application by the trustees or beneficiaries.

Court will only replace a trustee if it is not in best interests of the trust for them to continue.

Simple disliking of the trustee is insufficient.

Question 14

Is disliking a trustee a sufficient ground to replace a trustee?

Answer 14

No.

This will be deemed insufficient by the court.

Question 15

Explain the s19 of TLATA 1996 method of replacing a trustee.

Answer 15

Beneficiaries serve written direction on a trustee or trustees to retire and appoint the new person (if any) specified in the notice.

S19 only applies if the beneficiaries are of full age and capacity and the decision is taken together (ad they between them are absolutely entitled to the trust property).

Following the valid written direction, trustee must retire by deed if:

1) reasonable arrangements have been made to protect their rights;

2) after their retirement there will be two trustees or a trust corporation left; and

3) another person is appointed to replace them or the continuing trustees consent by deed to their retirement.

Question 16

In what situations can a s19 (notice to the trustees of a trustee to retire) not be served by the beneficiaries?

Answer 16

If the trust instrument:
- excludes this power; or
- the trust instrument nominates someone to appoint t new trustees.

Question 17

What is the s41 method of replacing/removing a trustee?

Answer 17

Achieved by application to the court.

Question 17

What is the s19 method of removing/ replacing a trustee?

Answer 17

Achieved by beneficiaries serving notice on the trustees.

Question 18

What are the 4 ways of appointing an additional trustee?

Answer 18

1) Trust instrument contains express provision allowing it;

2) S36(6) TA 1925;

3) S41 TA 1925; or

4) S19 TLATA 1996.

Question 19

Explain the s36(6 TA 1925 method of appointing an additional trustee.

Answer 19

This is where the appointment is made bu the person who has the power to do so in accordance with the trust deed, or in the absence of this provision, by consent of the continuing trustees.

The appointment must be in writing.

Question 20

Explain the s41 method of appointing a new trustee (an additional trustee).

Answer 20

Court appoints new trustee if expedient to do so, and it is otherwise expedient, difficult or impractical without the court’s assistance.

Court makes the appointment following an application by the trustees or the beneficiaries.

Question 21

Explain the s19 TLATA 1996 way of appointing an additional trustee.

Answer 21

Allows beneficiaries to serve written notice on current trustees directing them to appoint an additional trustee.

Beneficiaries must all be of age and mental capacity, and all together be absolutely entitled to trust property.

Question 22

What is the effect of the death of a trustee?

Answer 22

If two or more trustees are appointed they hold legal title together.

When one dies, legal title vests in the remaining trustees.

Where only 1 trustee is left, they should be advised to point a replacement trustee under s36(1).

Question 23

Explain delegation by a trustee to an appointed attorney.

Answer 23

Trustee can delegate their functions to a deputy.

Delegation should be made by deed in form prescribed by s25 TA 1925.

Delegation can turn for up to 12 months.

Written notice of delegation must be given to all other trustees and to any other person with the power to appoint new trustees, within 7 days of the delegation.