Mr and Mrs has a gift and loan trust.
They want to access some of their loan to help daughter buy a property who is one of the beneficiaries.
However Mrs is no longer mentally capable and Mr and Mrs are the only trustees.
Trust requires minimum of two trustees.
Mr needs to appoint a replacement trustee to his wife but, as settlors, can Mr and his wife’s POA request repayment of their loan?
It is possible to replace incapable trustees, however it is not possible to use these provisions if the incapable trustee is also entitled to some beneficial interest in the trust property.
An application should be made to the Court of Protection to exercise its powers under s18(1)(j) of the Mental Capacity Act 2005.
Should have said ss. 633-8. s638 deals with loans.
Jack Harper
Is there any problem with ss. 633-637 ITTOIA 2005?
Jack Harper
I don’t see a problem with the attorney requesting a repayment of loan, the problem will be with the ultimate purpose of the repayment which is presumably to make a gift to the daughter. Perhaps Mr can gift his share of the loan repayment and Mrs can keep hers?
There may be a practical difficulty obtaining a repayment if one of the trustees has lost capacity. It would normally be possible to appoint a replacement trustee. I don’t think that the interest of Mrs as a creditor is an ‘interest in the trust’ and so I don’t believe the involvement of the COP should be necessary (assuming she doesn’t have any other interest in the trust). Ultimately however the investment provider may create difficulties.
Paul Davies
Clarke Willmott LLP