Retiring as a trustee of a trust is not always as simple as you might think! Trustees must do more than just notify their co-trustees or the trust’s beneficiaries of their plans to retire. Proper procedures must be followed or else retiring trustees may find themselves personally liable for later breaches of trust, or debts of the trust.

It is therefore essential that trustees who are considering retiring from their role understand what they need to do in order to successfully remove themselves as trustee.

Below is a quick 5 step guide on how to retire as a trustee of a family trust.

1.    Review the Trust Deed

In the first instance, trustees should examine their trust deed to ascertain whether there are any provisions for the retirement of trustees. 

Where the trust deed provides for the retirement of trustees, it is important that the terms of the deed and the process it sets out are followed.  For example, some trust deeds provide that there must be a minimum number of trustees.

2.    Prepare a Deed of Retirement of Trustee

A formal Deed of Retirement of Trustee should be prepared. Trustees may find it helpful to obtain legal assistance in drafting this document as it must comply with the statutory requirements set out under the Trustee Act 1956.

Retiring, continuing and any new trustees must sign the Deed of Retirement of Trustee to make it effective.

3.    Transfer Trust property

Once a trustee has retired, the trustee must transfer any property owned by the trust to the continuing and/or new trustees. 

The most common asset for a trust to own is the family home.  If the property is subject to a mortgage, often the bank will require a full refinance and new loan documents to be signed when a trustee changes. 

The title transfer documents must be signed by all trustees (both new and old) and in order to complete the transfer the trust must now have its own IRD number. 

4.    Update signing authorities

A retiring trustee must also update any signing authorities with banks or other institutions that the trust is involved with.

5.    Advise IRD of Trustee retirement

The Commissioner of Inland Revenue must be advised in writing of the retirement of a trustee, otherwise the retiring trustee could be left with some tax liability.

What if my co-trustees do not agree to my retirement?

Sometimes trustees oppose the retirement of a trustee as the retirement process can be expensive and may leave remaining trustees open to further liability. In these circumstances, a retiring trustee should give notice of their intention to retire to any co-trustees, and to any person with the power to appoint and remove trustees. The retiring trustee should then pass the trust’s accounts to the Registrar of the High Court. This is very rare as it is in the party’s best interests to reach an agreement.

Alternatively, if there is no one able or willing to appoint a new trustee, the retiring trustee can apply to the High Court to appoint a trustee.

For more information on trusts or retiring as a trustee, please contact Lindsey Mills at lmills@raineycollins.co.nz

Lindsey Mills
Senior Legal Executive
Wellington