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On 24 September 2021, Bethan Read presented at the Legalwise elder law conference. Bethan’s presentation focussed on trusts and considerations for trustees acting later in life, including trustee duties and responsibilities, what happens when a trustee becomes incapacitated or dies and practical considerations for settlor trustees.
Trustee duties and responsibilities
The Trusts Act 2019 sets out a number of duties, including mandatory and default duties. The duties that are of particular relevance to trustees acting in later life are the:
These duties emphasise the need for trustees to be proactive and, particularly in the current pandemic, comfortable with using technology to carry out their duties. Keeping pace with the dramatic and ever-changing impact of COVID-19 on investments is a significant task, which trustees are expected to do.
The consequences of breaching trustee duties while in office are serious and can result in personal liability. Trustees need to be comfortable with the responsibilities of being a trustee and ensure they are able to fulfil their duties. Where there is any concern that an elderly trustee is no longer fulfilling the duties of office, it is likely that the benefits associated with being a trustee are not worth the risk.
Capacity concerns
When a trustee loses capacity, section 104(1) of the Act provides that any person holding a power of removal of trustees must use this power to remove the incapacitated trustee. If no one holds this power, then the other trustees must collectively remove the incapacitated trustee. If the incapacitated trustee is the sole trustee, then their attorney under an enduring power of attorney for property or their court appointed property manager must replace them.
Section 38 of the Act requires trustees to act unanimously unless the trust deed says otherwise. This becomes impossible where a trustee has lost capacity so it is essential that the appropriate person removes an incapacitated trustee promptly to ensure the trust can continue to operate.
Administration following the death of a trustee
The Act provides clear mechanisms for replacing a trustee who dies in office. A deceased trustee must be replaced if:
Section 92 of the Act confirms that any person holding the power to appoint trustees under the trust deed can replace a deceased trustee in these circumstances. If no one holds this power, then the remaining trustees can appoint a replacement. If the deceased trustee was the sole trustee, the deceased trustee’s personal representatives become responsible for his or her replacement. Given personal representatives may have little knowledge of the trust, proper succession planning of trusteeships is important to ensure an appropriate successor is appointed.
Considerations for settlor trustees
Many individuals act as trustees of trusts that they settled. For these individuals, it is also important to consider the succession planning of both their role as trustee as well as the trust. Mechanisms should be put in place to appoint successor trustees automatically in certain circumstances, such as death or incapacity, to ensure the continued operation of the trust. Settlor trustees should also consider whether the trust continues to offer benefits and whether the purpose of the trust still remains. If the trust is no longer needed, the better approach may be to terminate the trust to remove the risks and problems that the trust may create for elderly trustees.
If you would like to learn more about some of the issues covered at the seminar, Bethan’s presentation is available on demand here.
If you are concerned about your role as trustee or are considering terminating your trust, contact Morris.