A, B & C are Trustees of a Discretionary Trust. The Trust holds a Legal Charge over A’s property and an Investment Bond.
A no longer has capacity but has completed and registered an LPA appointing D.
Can B, C & D (on behalf of A) complete a Deed of Retirement and Appointment of New Trustee?
Justin Wallace
Brewer Harding & Rowe
No.
However, does A have sufficient capacity to retire as a trustee? This
requires only a low level of capacity - far less than if there were to
be a simultaneous retirement and appointment.
Paul Saunders
s36 Trustee Act 1925 requires only B & C to appoint someone in A’s place. This assumes that the trust instrument does not specifically grant anyone the power to appoint trustees and that A does not have an IIP in the trust fund (I appreciate that you say it is a discretionary trust - sometimes beneficiaries are granted an IIP, revocable or otherwise, out of a discretionary trust).
Life insurance companies can be a bit awkward with assignments of investment bonds. If they will not accept the Deed of Appt/Ret on its own, they may require a Deed of Assignment signed by B, C & D (D signing as attorney for A) to transfer the investment bond to B, C and whomever they appoint as the replacement trustee. I normally include an assignment in the DORA itself to avoid the need for a separate deed and avoid any argument from the life insurance company, but as A is not actually executing the deed, a separate Deed of Assignment may be necessary. I would give the life insurance company a call and ask them whether they will accept the DORA on its own.
Paul Davidoff
Moon Beever
I thought a court order was needed to vest assets in these circumstances if they did not pass under the implied vesting in the Trustee Act.
Simon Northcott
Thank you for your responses. Mr reading is that s 36(1)(b) would enable B&C to either retire A or retire A and appoint someone in her place.
s36(6)(A) would also enable D to sign on behalf of A which I think would be of use if we couldn’t use s36(1)(b).
My only concern is that Simon has raised the issue of having to obtain a Court Order. Am I missing something?
Justin Wallace
Brewer Harding & Rowe
As Simon has said, there is one issue in appointing a new trustee; there’s a separate issue in having the trust assets vested in the (new) trustees.
You can indeed deal with the first of these under the Trustee Act 1925.
But ownership of property can only pass from one person to another under English law with a court order. A Grant of Probate, for example, is only another example of a court order. You would end up with nice shiny new trustees, able and willing to act, but without ownership of the trust assets. To vest the trust assets you are going to need an order of the Chancery Division, vesting the assets in the new trustees.
Julian Cohen, Solicitor
Indeed, as Julian says above, a Court order is required for certain assets. This is pursuant to s.40 Trustee Act 1925. Unfortunately I think both of the trust’s assets would fall within the s.40(4) exclusions to automatic vesting.
Alex Jenkins
Toller Beattie
I am looking for any information/case law/practice note regarding a solicitor’s duty to determine if an attorney appointed by the donor, in the donor’s P&FA LPA is/is not bankrupt/subject to a debt relief order before the solicitor registers the LPA?
Thank you.
Leslie Emilie Tuck
Mewies Solicitors
Thank you for your comments.
The Legal Charge is actually granted by A in favour of B & C and the restriction is registered in favour of B&C. I think therefore we may be ok with the Legal Charge. This leaves the Bond and I know from past experience that it really comes down to what the specific company will / will not be prepared to accept.
Justin Wallace
Brewer Harding & Rowe