Trustees: appointment, removal & retirement Flashcards
Who can be trustees?
- Most adults with mental capacity
- A company (so long as authorised to do so by its constitutional documents)
eg. trust corporations are corporate trustees that carry out trust business for profit
What is the minimum & maximum number of trustees?
Trusts over land: min. 2 & max. 4
Trusts of personalty: min. 1 (altho better to have more) & no max. (although this is impractical)
ie. Best practice to ensure there are always between two & four
Retirement of trustee - what are the 3 provisions they can use to retire?
- An express power in the trust instrument (rare)
-
s.39 TA 1925: trustee can retire without being replaced if:
(a) There will be 2 trustees or a trust corp left
(b) The trustee retires by deed
(c) The other trustees consent by deed - s36(1) TA: retiring trustee must be replaced by the appointment of a new trustee
- The new trustee is appointed by the person nominated in the trust instrument to exercise the s36 power - but if none, by the continuing trustees (incl the retiring trustee if they want)
- The appointment must be in writing (advantageous to use a deed)
What are the conditions under s39 Trustee Act for a trustee to retire without being replaced?
(a) There will be two trustees or a trust corp left
(b) The trustee retires by deed
(c) The other trustees consent by deed
What is the power of retirement set out in s36(1) TA 1925?
Retiring trustee must be replaced by a new trustee, who is appointed by:
- The person nominated in the trust instrument to exercise the s36 power, but if none
- The continuing trustees (incl. the retiring trustee if they are willing)
The appointment must be in writing & it is best to use a deed
(bc a deed automatically vests the trust property in the continuing & new trustee)
Is a trustee who has retired liable for breaches of trust?
A retiring trustee remains liable for their own breaches but will not be liable for future breaches (unless they retired to facilitate the breaches)
What are the four provisions that may be used to remove & replace a trustee?
I. An express power in the trust instrument (rare)
II. s36(1) TA
- Grounds for replacing: trustee is dead; remains outside UK for more than 12 months; wants to retire; refuses to act; is unfit to act; is incapable of acting; is a minor
- Who effects the replacement?
-The person nominated in the trust instrument to exercise the s36 power - but if none;
-The continuing trustees (incl retiring trustee if they’re willing)
-If all trustees have died, the PRs of the last surviving trustee - Appointment must be in writing (best to use deed)
III. s41 TA: the court will replace a trustee if it is expedient to do so & it is otherwise inexpedient, difficult or impractical to appoint without the court’s assistance
- Trustees / beneficiaries have to apply to the court
- Court generally acts only where there has been maladministration
IV. s19 TLATA: the beneficiaries can serve a written direction on a trustee(s) to retire & appoint a person (if any) specified
- Will not apply if the trust instrument excludes it or nominates someone to appoint new trustees
- Applies only if the beneficiaries are of full age & capacity and taken together are absolutely entitled to the trust property
*If valid written direction, trustee must retire by deed if:
-Reasonable arrangements have been made to protect their rights; and
-There will be 2 trustees or a trust corp remaining; and
-Another person is appointed to replace them or the continuing trustees consent by deed to their retirement
What is the power of removal & replacement set out in s36(1) TA 1925?
A trustee can be replaced if the trustee:
- Is dead
- Remains outside the UK for more than 12 months
- Wants to be (ie. retires)
- Refuses to act (disclaims)
- Is unfit to act
- Is incapable of acting (eg. mental/physical incapacity)
- Is a minor
The replacement is effected by
-The person nominated in the trust instrument to exercise the s36 power, but if none:
-The continuing trustees
-If all the trustees have died, the PRs of the last surviving trustee
Appointment must be in writing (best to use a deed)
What is the power of removal & replacement of a trustee under s41 TA 1925?
The court will replace a trustee if it is expedient to do so & it is otherwise inexpedient, difficult or impractical to appoint without the court’s assistance
- Trustees / beneficiaries must apply to the court
- Court will only generally intervene where there has been maladministration by the trustee (not just because the beneficiaries don’t like them)
What is the power of removal & replacement set out in s19 TLATA?
The beneficiaries can serve a written direction on a trustee to retire & appoint any person specified in the new direction
- Will not apply if the trust instrument excludes it or nominates someone to appoint the new trustees
- Beneficiaries must be of full age & capacity and taken together are absolutely entitled to the trust property
- If valid written direction, trustee must retire by deed if:
-Reasonable arrangements have been made to protect their rights; and
-There will be 2 trustees or a trust corp left; and
-Another person is appointed to replace them or the continuing trustees consent by deed to their retirement
What are the 4 ways trustees or beneficiaries can appoint an additional trustee (without making any of the existing trustees step down)?
A. An express power in the trust instrument (rare)
B. s36(6) TA
- Appointment made by the person nominated in the trustee instrument or, if none, the continuing trustees
- Can be no more than 4 trustees once the additional appointments are made
- Appointment must be in writing (best to use a deed)
C. s41 TA: court will appoint a new trustee if it is expedient to do so & it is otherwise inexpedient, difficult or impractical to appoint without the court’s assistance
D. s19 TLATA: beneficiaries can serve a written direction on the current trustees requiring the appointment of an additional trustee
- Does not apply if the trust instrument excludes it or nominates someone to appoint new trustees
- Applies only if the beneficiaries are of full age & capacity and taken together are absolutely entitled to the trust property
What is the power of appointment set out in s36(6) TA 1925?
The person nominated in the trust instrument or, if none, the continuing trustees can appoint a new trustee
Can be no more than 4 trustees once additional appointments made
Appointment must be in writing (best to use deed)
Can a trustee appoint a deputy to manage the trust for them?
Yes → the deputy is called an attorney
- Appointment can only last for up to 12 months
- Appointment should be made by deed & written notice should be given to all other trustees & any other person with the power to appoint new trustees within 7 days
- Trustee is vicariously liable for all acts or defaults of their attorney
- Trustee must choose their attorney with care
Is a trustee liable for the acts of their attorney?
Yes - trustee is vicariously liable for all acts or defaults of their attorney
