Removal and appointment of trustees

This article is the fourth in our series on the new Trusts Act 2019 (click here to access the most recent article), which comes into force on 30 January 2021 and is the first major reform in this area of the law in 70 years.

Removal of trustees

A common issue faced by trustees in New Zealand is the need to remove a trustee who has lost mental capacity, especially when that trustee has the power of appointment and removal.  An Enduring Power of Attorney in Relation to Property could not be used to deal with this issue as the trust property is not the personal property of the Trustee.

Currently, the remaining trustees would have to apply to the High Court for an order removing that trustee and perhaps appointing a replacement of the incapacitated trustee, which was an expensive and time-consuming process.

Fortunately, the new Act makes this process much easier, and provides the following person(s) with a power to remove a trustee:

• The person named in the Trust Deed as having that power; or
• If no one has that power, or the person who does is unwilling or unable to act, or if there are no remaining trustees, then a person holding an Enduring Power of Attorney in Relation to Property over the affairs of the trustee who has lost capacity has the power to action the removal.

Appointment of trustees

Similarly, the new Act makes it easier to appoint a new trustee whether as a result of a retirement or removal of a current trustee.  The Act provides different person(s) with the power to remove based on the particular circumstances that exist.

Firstly, irrespective of whether a Trustee is retiring, is being removed, or where a Trustee has died, then:

• The person nominated by the Trust Deed for this purpose; or
• If nobody is nominated, or the nominated person is unwilling or unable to act, then the remaining trustees, have the power of appointment.

If there is nobody available that fits into the above criteria, or they are unable or unwilling to act then:

• In the case of a trustee who is retiring, they can themselves appoint a trustee to replace themselves;
• In the case of a trustee who has been removed, then the person who holds an Enduring Power of Attorney in Relation to Property for the removed trustee, may appoint a replacement; or
• In the case of a trustee having died in office, their executor(s) may appoint a replacement.

It is therefore important that your Trust Deed clearly identifies who is to have the power of appointment and removal of trustees to ensure that a third party, not of your choice, does not end up having this power.

If you have concerns or any queries surrounding the provisions of your Trust Deed around these issues, or for that matter any other query you may have, please do not hesitate to get in touch.

If you have any questions about the matters raised in these articles, please call to discuss further.

Lifelaw team

Stephen Jeffery, Monica Ryan, Gerard Thwaites, Chris Anderson, Rosemary Aitken, Vanessa Boyd, Sherie Adams, Lisa Penn, Ant Lilley