Trustees: Appointment, Removal and retirement

Question 1

Who can be appointed as a trustee of an express trust?

Answer 1

1. Eligibility Criteria:
   * Any adult with mental capacity can act as a trustee.
   * Statutory disqualifications apply in some cases:
   * Individuals convicted of certain offenses or declared bankrupt may be disqualified from serving as trustees in charitable or pension trusts.

• For specific trusts like charitable trusts, there are additional statutory regulations under the Charities Act.

2. Corporate Trustees:
   * Companies can act as trustees if authorized by their constitutional documents.

• Trust Corporations:
• Specialized corporate entities that act as professional trustees for a fee.
• They provide continuity and expertise, especially for long-term trusts or those requiring complex management.

3. Factors to Consider When Choosing Trustees:

• Trustees’ financial acumen, knowledge of trust law, and ability to act impartially.
• Whether the trustee is a family member (close to beneficiaries) or a professional (neutral and experienced).

Question 2

What are the minimum and maximum numbers of trustees allowed for different types of trusts?

Answer 2

1. Trusts Over Land:
   * Minimum: Two human trustees or one trust corporation.

• Maximum: Four trustees.
• Rationale: Ensures
  overreaching of beneficial interests when the land is sold (buyers can acquire land free of the beneficiaries’ equitable interests).

2. Trusts of Personalty (Non-Land Property):
   * Minimum: One trustee.
   * Maximum: No statutory limit, but practical considerations (cost, coordination) often limit the number to 2–4 trustees.
3. Mixed Asset Trusts (Land + Personalty):

• Best practice: Maintain 2–4 trustees to manage trust property efficiently and meet statutory requirements.

4. Practical Considerations for Trustee Numbers:

• Too few trustees may lead to gaps in administration, especially in case of death or incapacity.
• Too many trustees can create inefficiency and decision-making delays.

Question 3

How can a trustee retire under the Trustee Act (TA) 1925?

Answer 3

1. Section 36(1): Retirement with Replacement

• Retiring trustee must be replaced.
• New trustee is appointed by:
• The person nominated in the trust instrument; or
• Continuing trustees, including the retiring trustee (if willing).
• Appointment must be in writing, and using a deed automatically vests trust property under s 40 of the TA 1925.

2. Section 39: Retirement Without Replacement
   * Allowed if:
   * At least two trustees or a trust corporation remain after the retirement.

• Retirement is formalized by deed.
• Remaining trustees consent by deed.

3. Liabilities of Retiring Trustees:

• Retired trustees remain liable for breaches of trust committed during their tenure.
• They are not liable for future breaches unless their retirement was designed to facilitate a breach.

4. Example: Erin and Flavia are trustees. Erin wishes to retire. Since only Flavia would remain, Erin cannot retire under s 39. She must find a replacement trustee under s 36(1).

Question 4

What are the statutory grounds for replacing or removing a trustee under Section 36(1) of the TA 1925?

Answer 4

1. Grounds for Replacement or Removal:
   * Death of a trustee.
   * Absence from the UK for over 12 months.
   * Refusal to act (disclaimer).
   * Desire to be discharged (retirement).

• Incapacity due to physical or mental health issues.
• Misconduct or unfitness to act as a trustee.
• Trustee is a minor.

2. Who Can Appoint a Replacement Trustee?
   * The person nominated in the trust instrument.
   * Continuing trustees.
   * Personal representatives of the last surviving trustee (if all trustees have died).
3. Requirements for Appointment:
   * Must be in writing.
   * Using a deed ensures automatic vesting of trust property (except certain assets like company shares).

Question 5

How can beneficiaries use Section 19 of the TLATA 1996 to compel a trustee to retire?

Answer 5

1. Beneficiaries’ Entitlement:
   * Beneficiaries must collectively be absolutely entitled to the trust property (e.g., no other potential beneficiaries).

• All beneficiaries must be of full age (18+) and have mental capacity.

2. Process:
   * Serve a written direction to the trustee requiring retirement.

• Ensure the retiring trustee’s rights are protected (e.g., indemnity against liabilities).
• Ensure at least two trustees or a trust corporation remain.
• Appoint a replacement trustee or secure consent from remaining trustees.

3. Example: Ivan, Juliette, and Kevin, beneficiaries of a trust, can compel George to retire under s 19 if they appoint a replacement trustee or ensure Harriet, the co-trustee, consents to act alone.

Question 6

How are additional trustees appointed under Section 36(6) of the TA 1925?

Answer 6

1. Appointment Process:

• The person nominated in the trust instrument can appoint additional trustees.
• If no such person is nominated, continuing trustees make the appointment.

2. Maximum Limit:

• No more than four trustees are allowed after the appointment.

3. Requirement for Appointment:

• Appointment must be in writing.
• Using a deed ensures automatic vesting of trust property under s 40 of the TA 1925.

4. Role of the Court (Section 41):
   * The court can appoint additional trustees if it is impractical or inexpedient for other parties to make the appointment.

Question 7

What happens when a trustee dies?

Answer 7

1. Multiple Trustees:
   * Surviving trustees automatically inherit the legal title as joint tenants under s 18 of the TA 1925.
2. Sole Surviving Trustee:
   * The sole trustee must appoint a replacement under s 36(1) to ensure the continuity of trust administration.
3. Practical Considerations:
   * Delayed replacement can lead to inefficiencies in trust management.

• Remaining trustees should act promptly to avoid gaps in administration.

Question 8

Can trustees delegate their functions? If yes, under what conditions?

Answer 8

1. Individual Delegation (Section 25, TA 1925):

• Trustees can delegate their functions by deed for up to 12 months.
• Written notice must be given to co-trustees and any appointers within seven days.
• Delegating trustee remains liable for acts or defaults of the attorney.

2. Collective Delegation:
   * Trustees may collectively delegate investment decisions to professional advisers.

• This type of delegation is often used for trust property requiring specialist financial expertise.

3. Example: Margaret, a trustee, delegates her duties to an attorney via deed before taking a nine-month sabbatical, notifying her co-trustees in writing.

Question 9

Can a trustee appoint an attorney under s 25 of the TA 1925 if the trust deed does not contain any express provision?

Answer 9

Yes, a trustee can use the power granted under s 25 of the TA 1925 to appoint an attorney regardless of whether or not the trust deed contains any express provision on the matter.