I believe the starting point is to identify if the settlor is acting in a fiduciary capacity, or in a personal capacity, when exercising the power of appointment.
Whilst I understand an attorney under a property and affairs LPA may exercise “personal” powers of P, they cannot exercise P’s “fiduciary” powers outside of the limitations set down in the Trustee Delegation Act 1999. The power of appointing trustees is not the exercise of a “trustee function” within the definition in TDA 1999.
Although there has been a lot of discussion as to whether the power to appoint (or remove) trustees is “fiduciary” or “personal”, I understand that the courts are veering towards the view that the power to appoint trustees is the exercise carries with it fiduciary duties (towards the beneficiaries) which would suggest, to my mind, that it must be a fiduciary power. Having said that, do different standards apply to a power exercisable by the settlor than to a “third party” power holder?
Whilst I believe that the power should be treated as a fiduciary power, I appreciate that if that is not the case then any appointment of trustees on that basis would be void (as would the purported release of any “outgoing” trustee).
If uncertainty persists, the most appropriate way forward may be to apply to court for directions.
However, I am sure that thus is not a novel situation and, like EMyers, would be interested to learn how others have managed this situation.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals