Trustees' role

Question 1

What are the rules on the maximum and minimum number of trustees?

Answer 1

There are no rules prescribing a minimum or maximum number of trustees but there is an exception for trusts of land, because legal title to land may only be held by a maximum of four persons. It is also necessary for such trusts to have a minimum of two trustees, in order to give good receipt.

Question 2

How are replacement trustees appointed?

Answer 2

Instead, replacement trustees may be appointed in one of the following ways:
· Using any express powers to appoint trustees found in the trust instrument.
· Using statutory powers to appoint trustees.
· By the beneficiaries exercising their Saunders v Vautier rights.
· In the case of charitable trusts, by the Charity Commission.
· By the court.

There is also a general statutory power to appoint new trustees in s 36 Trustee Act 1925 (‘TA 1925’).

Question 3

How can the general statutory power to appoint trustees be exercised?

Answer 3

· On the death of a trustee
· If a trustee is abroad for over a year
· If an appointed trustee is a minor or otherwise lacks capacity to act
· If a trustee wishes to retire, refuses to act or is unfit to act

This power may be exercised by the persons nominated in the trust instrument to appoint trustees or, if there are no such persons, by the surviving or continuing trustees. If all the trustees have died, the power is exercisable by the personal representatives of the last to die (s18(2) TA 1925).

Question 4

How can beneficiaries exercise their Saunders v Vautier rights to replace trustees?

Answer 4

statutory power in s 19 Trusts of Land and Appointment of Trustees Act 1996 (‘TLATA’) which gives beneficiaries with Saunders v Vautier rights the power to direct the trustees to appoint a new trustee.
This power must be exercised in writing and cannot be exercised in cases where the trust instrument contains an express power to appoint trustees.

Question 5

What does the court do when replacing a trustee?

Answer 5

When exercising its statutory power, the court will consider the following principles:
· The court should consider the wishes of the settlor or testator (if such wishes are expressed or evidenced in the trust instrument)
· The court should not appoint a trustee where there a dispute between the beneficiaries as to whether that person would be appropriate.
· The court should consider whether the appointment will promote or impede the trust administration. This means the court should take into account the views of the existing trustees, but must consider whether those views are reasonable.

Question 6

How can a trustee be removed?

Answer 6

• The trust instrument may contain rules dealing with removal of trustees.
• The general statutory power to appoint trustees also effectively extends to removing trustees in the circumstances where it is considered necessary to replace them.
• The court also has both statutory and common law powers to remove trustees.
• The Charity Commission also has the power to remove charity trustees.

Question 7

How do trustees retire?

Answer 7

Voluntary retirement
A trustee can voluntarily retire by deed where there are at least two people or one trust corporation to act as trustees and the co-trustees and any person with a power to appoint trustees consents: s 39(1) TA 1925.
Trustees who retire must also comply with the statutory requirements or they will remain in office. A trustee who retires from the trust should obtain a formal discharge of liability from the beneficiaries.
By direction of the beneficiaries
In addition to having a power under s 19 TLATA to appoint trustees, beneficiaries with Saunders v Vautier rights also 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.
As with voluntary retirement, the power can only be exercised if, after the retirement of the trustee, there will remain at least two trustees or one trust corporation.

Question 8

True or false: Any person can be a trustee

Answer 8

False

A trustee must be an adult of sound mind

Question 9

The sole trustee of a trust for a minor beneficiary has just died. The trust instrument contains no powers to appoint trustees.

Who has the power to appoint a replacement trustee?

The court only.

The settlor.

The trustee’s personal representatives only.

Nobody.

The trustee’s personal representatives and the court.

Answer 9

The trustee’s personal representatives and the court.

The trustee’s personal representatives can exercise the statutory power to appoint trustees. The court also has a statutory power to appoint a new trustee but is only likely to exercise it if the personal representatives cannot or will not exercise it.

Question 10

A trust has two trustees, neither of which is a trust corporation. One of the trustees wishes to retire immediately.

Can they do so?

No, another trustee needs to be appointed before the trustee can retire.

Yes, as long as they obtain the consent of their co-trustee and any person with a power to appoint trustees.

Yes, as long as they obtain the consent of their co-trustee.

Yes, but only if directed to do so by the beneficiaries.

Yes, as long as they obtain the consent of any person with a power to appoint trustees.

Answer 10

No, another trustee needs to be appointed before the trustee can retire.

S39(1) TA 1925 gives trustees the power to retire but only if there would be at least two trustees or a trust corporation remaining. To exercise this power the trustees must also obtain the consent of their co-trustees and any person with a power to appoint trustees.

Question 11

How can a trustee retire?

Answer 11

(1) The trust instrument may contain an
express power for trustees to retire but
this is unusual

(2) Section 39 of the TA 1925 allows a
trustee to retire without being replaced.
Conditions:
(a) there will be two trustees or a trust
corporation left
(b) the trustee retires by deed
(c) the other trustees consent by deed.

(3) Section 36(1) of the TA 1925
*
The retiring trustee must be replaced by the
appointment of a new trustee.
*
Who appoints the new trustee?
(a) the person nominated in the trust
instrument to exercise the s 36 power,
but if none
(b) the continuing trustee(s) (which includes
the retiring trustee if they are willing to
join in the appointment).
*
s 36 states that the appointment must be
in writing. Why is it advantageous to use a
deed? (See TA 1925, s 40)
Under s 40, a deed automatically vests the
trust property (apart from company shares
and some other limited forms of property) in
the continuing and new trustee.

Question 12

How can trustees be removed/replaced?

Answer 12

(1) The trust instrument may contain an
express power to remove and/ or replace
trustees but this is unusual.
(2) Section 36(1) of the TA 1925
*
Grounds for replacing a trustee:
(a) the trustee is dead
(b) remains outside the UK for more
than 12 months
(c) desires to be discharged (retire)
(d) refuses to act (disclaims)
(e) is unfit to act
(f) is incapable of acting (eg mental
or physical incapacity)
(g) is a minor.
*
Who effects the replacement?
(a) the person nominated in the trust
instrument to exercise the s 36
power, but if none:
(b) the continuing trustee(s) including
a retiring trustee if they are willing
to join in the appointment;
(c) if all trustees have died, the PRs
of the last surviving trustee.
*
Section 36 states that the appointment
must be in writing. Why is it
advantageous to use a deed? (See TA
1925, s 40)
Under s 40, a deed automatically
vests the trust property (apart from
eg company shares) in the continuing
and new trustee.
(3) Section 41 of the TA 1925
*
Grounds? The court will replace a trustee if
it is expedient to do so and it is otherwise
inexpedient, difficult or impractical to
appoint without the court’s assistance.
*
The court makes the appointment
following an application by the trustees or
the beneficiaries.
*
The court will only replace a trustee if it
is not in the best interests of the trust for
them to continue. Mere dislike of a trustee
is generally insufficient.
(4) Section 19 of the TLATA 1996 allows
beneficiaries to serve a written direction on
a trustee or trustees to retire and appoint the
person (if any) specified in the direction.
*
s 19 does not apply if the trust instrument:
∘
excludes it, or
∘
the trust instrument nominates
someone to appoint new trustees.
*
s 19 applies only if the beneficiaries
are of full age and capacity and taken
together are absolutely entitled to the trust
property.
*
Following a valid written direction, the
trustee must retire by deed if:
(a) reasonable arrangements have been
made to protect their rights;
(b) after their retirement there will be two
trustees or a trust corporation left; and
(c) another person is appointed to
replace them or the continuing
trustees consent by deed to their
retirement.

Question 13

Appointment of additional trustees?

Answer 13

(1) The trust instrument may contain an express
power to appoint new trustees but this is
unusual.

(2) Section 36(6) of the TA 1925
*
Who makes the appointment?
The person nominated in the trust
instrument or, if none, the continuing
trustee(s).
There can be no more than four trustees
once the additional appointments
are made.
*
s 36 states that the appointment must
be in writing. Why is it advantageous to
use a deed? (See TA 1925, s 40)
Automatic vesting of trust property
as above.

(3) Section 41 of the TA 1925
*
Grounds?
As above. The court will appoint a new
trustee if it is expedient to do so and
it is otherwise inexpedient, difficult
or impractical to appoint without the
court’s assistance.
The court makes the appointment
following an application by the trustees
or the beneficiaries.
(4) Section 19 of the TLATA 1996 allows
beneficiaries to serve a written direction
on the current trustees requiring the
appointment of an additional trustee.
For conditions see above.

Question 14

What happens if a trustee dies?

Answer 14

If two or more trustees are appointed, they will hold legal title to trust property as joint tenants,
with the result that if one dies, the legal title will devolve to the surviving trustees (TA 1925,
s 18). If there is only one surviving trustee left, that trustee should be advised to appoint a
replacement trustee under s 36(1) of the TA 1925 to ensure the continuity of trust administration.

Question 15

Appointment of an attorney?

Answer 15

If a trustee is concerned that they might not be able to perform their functions in running the
trust for a period of time, they should consider delegating those functions to a ‘deputy’ called
an attorney.
The delegation should be made by deed in the form prescribed under s 25 of the TA 1925.
The delegation can run for a period of up to 12 months. Written notice about the delegation
must be given to all other trustees and any other person with the power to appoint new
trustees within seven days of delegation.
The delegating trustee will be automatically liable for the acts or defaults of the attorney as if
they were the acts or defaults of the trustee.
As well as one trustee individually delegating their functions to an attorney, the trustees
collectively can delegate decisions on how best to invest trust property to an independent
financial adviser.

Question 16

ple questions
Question 1
In his valid will, a man created a trust over his residuary estate for such of his children
surviving his death and, if more than one, in equal shares. Two trustees were appointed to
manage the trust. The will contained no express provisions dealing with the appointment or
retirement of trustees.
The man was survived by three children who are currently aged 22, 19 and 16 years
respectively. The beneficiaries are unhappy with the way that the trustees have managed
the trust since the man’s death.
Which of the following best describes whether the beneficiaries can remove the
trustees?
A The beneficiaries have no power to remove trustees, as the removal, retirement and
appointment of trustees is a matter for the trustees alone.
B The beneficiaries cannot direct that the trustees should retire because they are not of
full age and capacity to make such a direction.
C The beneficiaries cannot apply to the court to remove the trustees because any
application to the court for removal of a trustee must be made by the trustees themselves.
D The beneficiaries can direct that the trustees should retire because taken together they
are absolutely entitled to the trust fund.
E The beneficiaries can direct that the trustees should retire but only if they appoint
replacement trustees in their place.

Answer 16

Answer
Option B is correct. Beneficiaries can direct that trustees must retire, but only if they satisfy
the conditions set out in s 19 of the Trusts of Land and Appointment of Trustees Act 1996.
Beneficiaries can only use this statutory provision if they are all of full age and capacity.
This is not the case here because one of the beneficiaries is under the age of 18 years.
Options A and C are wrong in stating that the matter of the appointment, removal and
retirement of trustees is a matter for trustees alone and that only trustees can apply to court
to assist with such matters. The appointment and removal of trustees can be directed by
the beneficiaries so long as they satisfy the statutory conditions of s 19 of the TLATA 1996,
and beneficiaries can apply to the court to replace trustees if it is expedient to do so and
it is otherwise inexpedient, difficult or impractical to replace trustees without the court’s
assistance.
Option D is wrong. Whilst it is correct to say that the children are, taken together, absolutely
entitled to the trust fund, this is only one of the statutory conditions that must be satisfied in
order for beneficiaries to take advantage of s 19 of the TLATA 1996 – they must also be of full
age and capacity. This is not the case here.
Option E is wrong. The option correctly reminds us that if the beneficiaries were able to use
s 19 of the TLATA 1996 to direct that the current trustees must retire, they would also need to
appoint replacement trustees – when using s 19 of the TLATA 1996 there must be at least two
trustees (or a trust corporation) in office after those trustees directed to retire have done so.
However, option E overlooks the fact that the beneficiaries cannot use s 19 of the TLATA 1996
in the first place given that they are not all of full age.

Question 17

Question 2
Three trustees were appointed by the settlor to hold property on trust for the testator’s four
nieces, all of whom are currently under the age of 18 years. The trust deed contained no
express provisions dealing with the appointment or retirement of trustees.
Shortly after their appointment, one trustee decided that he did not want to take part in
the running of the trust and went abroad to live in his second home in the south of France.
Fifteen months later, the two remaining trustees want to tell their co- trustee that they have
removed him from office.
Which of the following best describes whether the two trustees can remove their co-
trustee living in France?
A The two trustees can remove their co- trustee in writing and continue to run the trust
themselves.
B The two trustees can remove their co- trustee by informing him orally and continue to run
the trust themselves.
C The co- trustee cannot be removed under any circumstances as he was originally
appointed by the settlor.
D The two trustees cannot remove their co- trustee without also appointing a replacement
co- trustee.
E The two trustees cannot remove their co- trustee and replace him with someone else
without making an application to the court.

Answer 17

Answer
Option D is correct. The two trustees could remove their co- trustee on the grounds that he
has been outside the UK for more than 12 months (see TA 1925, s 36(1)). However, they can
only remove the co- trustee on this ground if they appoint a replacement trustee in his place.
Option A is wrong. The two trustees have no power themselves to remove their co- trustee
without appointing a replacement trustee.
Option B is wrong. Not only will the trustees be unable to remove their co- trustee without
replacing him, if the trustees want to exercise statutory powers to remove co- trustees, they
will have to notify the removed trustee in writing – orally confirming this to the outgoing
trustee is insufficient.
Option C is wrong. The statutory powers to remove trustees can apply to those trustees
originally appointed by the settlor.
Option E is wrong. The two trustees can remove and replace their co- trustee without making
an application to the court.

Question 18

Question 3
A woman is about to undergo surgery and has been advised that she will need to take at
least six months off work in order to recover. The woman is a trustee and is worried about
being able to perform her functions as trustee while she is recovering from the surgery.
There is nothing in the trust deed that says anything about appointing someone else to step
into her role.
Which of the following best describes whether she can appoint someone else to step
into her role while she is unable to perform her functions?
A She can appoint an attorney by telephone and should take care about who she
appoints.
B She can appoint an attorney by deed and should take care about who she appoints.
C She can appoint an attorney by deed and does not need to worry about who she
appoints.
D She cannot appoint an attorney as she was personally chosen by the settlor to be a
trustee.
E She cannot appoint an attorney as there is nothing in the trust deed that allows this.

Answer 18

Answer
Option B is correct. The trustee can (and should) appoint an attorney to carry on her role
while she is indisposed. That appointment must be made by deed. As the trustee will be
automatically (vicariously) liable for any defaults of the attorney, she should take great care
in selecting someone she thinks will do a good job.
Option A is wrong. The appointment of an attorney must be made by deed (TA 1925, s
25) and cannot take place over the telephone.
Option C is wrong. The trustee will be automatically (vicariously) liable for any defaults of
the attorney she appoints, so she must take care when making her selection.
Option D is wrong. The fact that she is an original trustee, chosen personally by the settlor,
does not prevent her from appointing an attorney.
Option E is wrong. 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.