An elderly man started to develop dementia and was unable to manage his own welfare or financial affairs.  He had a family trust that owned the home he lived in.  He and his daughter were the Trustees. 

He had set up Enduring Powers of Attorney for Property, and Personal Care and Welfare, while he had capacity, but had not considered his trusteeship of the family trust at that time. 

When he lost capacity completely, his daughter decided that the Trust should sell the home as her father needed to go into a rest home.  She went to her lawyer, as she was unsure if her Enduring Power of Attorney applied to trust assets.

The new Trusts Act 2019 makes it compulsory for a Trustee who has ‘lost the capacity to perform the functions of a Trustee’ to be removed.

Under the previous law this was a difficult process to carry out in practice, however, under the new Trusts Act, if a trustee loses capacity, they may now be removed by a person with the power of removal in the trust deed. This is somebody who has been given this right through the terms of the Trust.

If nobody has been granted the power to appoint or remove Trustees, then:

a)    The remaining Trustees may remove the incapacitated Trustee;

b)    If there are no remaining Trustees and nobody has been given the power of appointment and removal, then any of the               following may remove the incapacitated Trustee:

  •          A property manager appointed under the Protection of Personal and Property Rights Act to act as the manager of             the Trustee’s property;
  •          A person holding an Enduring Power of Attorney over the property of a Trustee who is mentally incapable; or
  •          The liquidator of a corporate Trustee that is in liquidation.

If the Trustee who is being removed is incapable of signing an Authority and Instruction (A&I) form to enable the registration of the change of ownership on the title to any property owned by the Trust (which will be the case if they have lost capacity to manage their affairs), then the remaining and new Trustee(s) are now allowed to sign on behalf of the removed Trustee.  There is a declaration they need to complete confirming the circumstances and proving the loss of capacity.

It is important to know how a Trustee can be removed under the new Trusts Act, and who has the right to remove a Trustee especially in the event that the property needs  to be sold. If confusion arises, it is wise to seek advice from an experienced professional in this area.