A middle aged couple set up a trust to hold their family home as they were both business owners.  As part of the trust setup they included in their Wills a gift of their “power of appointment of trustees” for the trust (that is, the power to appoint and remove trustees after they had gone).  The wife gave this power to her sister.

Once both the husband and wife had passed away the only remaining person with the power of appointment of trustees for the trust was the wife’s sister.  In between the time of setting up the Will and trust and the time of the wife’s death, the wife and her sister had fallen out and were no longer in contact. 

The estranged sister therefore essentially had control of the family trust.  The sister then appointed her own accountant as trustee of the family trust and purported to change the beneficiaries of the trust to charities rather than the couple’s children. 

The children sought to apply to the Courts to challenge the decisions of the sister as trustee and were ultimately successful, however this cost them a lot in terms of time, stress and money. 

If you are a settlor or trustee of a trust, when you are considering who to give your power of appointment of trustees to, you should think carefully about how they will interact with the remaining trustee(s) of the trust and, of course, whether they would act in the best interests of the beneficiaries of the trust. 

Many people will give their power of appointment of trustees to their children once they reach a certain age, and had this been done in this case the issues would not have arisen.

Changes to trust law likely to come into force in the future will make these situations easier to deal with, however currently an issue like this leads to Court action which is expensive and time consuming for those left behind.