30.06.25

The key to the effectiveness of any Trust is the choice of Trustees. Choosing the right Trustees when a Trust is created is very important and we have given some advice on this in our previous blog post. However, a Trust can last up to 125 years and so it is very likely that at some stage it will be necessary to change Trustees.

Some of the circumstances which may require a change of Trustees include:

• The death of a Trustee;
• A Trustee feeling that they can no longer act as Trustee due to age or illness;
• A Trustee losing capacity to make decisions;
• A Trustee has as irreconcilable disagreement with his or her fellow Trustees; and
• A Trustee does not properly carry out their duties as Trustee

This blog provides an overview of the types of thing you will need to think about when changing Trustees.

Who are the current Trustees?

The starting point is to check the Trust document to find out who the current Trustees are. Trusts can be standalone documents or they can be hidden within Wills. You should check if anything has happened since the Trust started. It might be that the Trustee who wants to stand down has already done so by an earlier retirement!

Appointing a Replacement or Adding Trustees

Next, you need to read through the Trust document to see if there are any specific provisions about appointing new Trustees. It might give power to a certain person to be able to appoint or change the Trustees and, if so, this will need to be followed. For example, a Trust will often give a power for the person who created the Trust (known as the Settlor) to change the Trustees during their lifetime.

If there are no specific provisions (or the person nominated to have authority to change Trustees is unable to exercise this power) then the rules are set out in the Trustee Act 1925.  This states that the current Trustees have the power to appoint replacement or additional Trustees.

Importantly, if there are ever no Trustees left alive then the Personal Representative (PR) of the last surviving Trustee has the power to appoint the Trustees. The PR might be someone who knows nothing or very little about the Trust and the people involved. To avoid this situation happening, we always recommend the swift appointment of a co-Trustee whenever a Trust is reduced to one surviving Trustee.

Retirement of a Trustee

Sometimes when a Trustee wants to retire, there is no need to appoint a replacement Trustee. This might be because they are at least two other continuing Trustees.

What if a Trustee loses Mental Capacity?

Unfortunately, even if a Trustee is carefully selected at the outset, things can happen during a Trustee’s lifetime which mean that they no longer have the required mental capacity to continue acting as a Trustee. This can create a difficult situation for the management of a Trust as a Trustee continues in their position until they are removed.  Most Trusts provide for the Trustees to act unanimously in managing the Trust and this won’t be possible where one Trustee does not have the required mental capacity to make decisions.

In this situation, the Trust document may state how a Trustee without mental capacity can be removed or, if no provisions are made, the continuing Trustee/s (or the PR of the last surviving Trustee) can remove them.  It is essential that the incapacity of the Trustee has been established before any action is taken to remove them, for more information about mental capacity take a look at our recent blog here.

There are situations where the approval of the Court of Protection is required to remove a Trustee, particularly where the Trustee in question has a beneficial interest in the Trust.

Removing a Trustee

It is rare but there are occasions where a Trustee refuses to retire even when it may not be appropriate for them to continue acting, for example in cases where there is evidence of misconduct by the Trustee or failure to carry out their duties.

It is possible to apply to the Court for the removal of the Trustee by Court Order but this needs careful consideration due to the potential costs that may be incurred and the effect it may have on the various people involved.

Who should be appointed?

Sometimes, although it is clear that a Trustee needs to retire, it is unclear who should be appointed in their place. In these circumstances, we recommend checking whether there is a document known as a Letter of Wishes. A Letter of Wishes is drawn up by the Settlor when the Trust is created and guides the Trustees as to how they should carry out their role as Trustee. Often, the Letter will specify who should be named as a replacement Trustee if one is ever needed.

If there is no one who the ongoing Trustees consider will be an appropriate Trustee, they might consider naming a professional Trustee as a replacement. Renaissance Trust Corporation accepts appointments as Trustee, and you can find out more about their Trust services here.

Formalities and record keeping

It is important that the appointment and / or retirement of a Trustee is recorded in a deed. Additionally, the outgoing Trustee needs to ensure that they transfer the trust assets over to the new and / or continuing Trustees.  They may need to sign documents to transfer assets over.

Sometimes, retiring Trustees seek an indemnity from the new Trustees to ensure they cannot be sued in the future for any wrongdoing by the Trustees.

When dealing with any changes to the Trustees, you need to ensure that the correct legal processes are followed.  Failure to do so could result in an invalid change and Trustees who thought they had retired may still be liable for the acts of the new Trustees.  If you have a Trust and are considering changing the Trustees or are thinking of setting up a Trust, please do get in touch.