Removal of incapacitated trustee

Is it possible to remove an incapacitated trustee without replacing them? The removal of the trustee would leave two continuing trustees, the outgoing trustee is the settlor of the trust but does not have any beneficial interest in the trust and the continuing trustees agree that the outgoing trustee lacks capacity.

Natalie Tonkin
Beviss & Beckingsale LLP

First check if the trustee has sufficient capacity to retire himself. If not is a capacity assessment from a qualified mental capacity assessor required.

Check the trust document itself. This can contain express authority for trustees to be removed and replaced but this is often not the case. Where it is not possible to rely upon the express terms of the trust deed, the following may be used.

Does the trustee have a power of attorney in place. this could be used as the trustee does not have a beneficial interest. Had a beneficial interest existed, the only recourse would be to apply to the court of protection.

Trustee Act 1925 – section 36

The provisions of section 36 Trustee Act 1925 (TA) confer the power to remove and replace trustees to either specified individuals or the continuing trustees (paragraph 1).

There are many scenarios in which this section may be used, one of which is where a trustee no longer has the mental capacity to continue to act in the role.

The provisions of this section are only available where there is at least one continuing trustee, and there is no dispute as to the lack of capacity or the removal and appointment of a new trustee.

From a practical point of view, appointments under section 36 TA are usually made by deed, ensuring that the trust property passes and vests in the hands of the new trustee in accordance with section 40.

Paragraph 9 of section 36 prohibits a trustee who is also a beneficiary, and who lacks capacity, from being removed. In this instance the application to the COP applies.

Andre Davidson

Hi Andre

Thank you for your helpful reply.

I should have said that the trust document is silent on the removal of Trustees.

I have gone back to ask about a power of attorney. It is likely that, if there is one, then the incapacitated trustee’s husband will be the attorney. Will he be able to use it even though he is a Trustee? He does not have a beneficial interest in the trust.

I am aware of S.36 TA 1925 and basically wanted to know if another trustee has to be appointed to replace the incapacitated trustee even though there will still be two continuing trustees?

Many thanks,
Natalie Tonkin
Beviss & Beckingsale LLP

Section 36 only allows for replacement.

It has been suggested to me previously that the replacement could retire almost immediately after appointment, leaving you with the outcome which seems to be desired.

Kind regards

Jane Huntley
Chadwick’s, Leyland

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Another trustee will need to be appointed under s36-you cannot use the power just to retire a trustee.

Simon Northcott

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I always appoint a partner in the firm as replacement and then he retires the next day.

Lorna Sansom
Blandy & Blandy LLP

If I can resurrect this thread please? So if the incapacitated trustee is only a discretionary beneficiary (rather than a life tenant) and there is a trustee POA in place then this can be used rather than a court application?

If the incapacitated trustee is only a discretionary beneficiary then (in the absence of express powers) you can use s.36 without having to make an application under s.36(9).

s36(9) uses the words “entitled in possession to some beneficial interest in the trust property”. In Gartside [1968] AC 553 the House of Lords held unanimously that, in an estate duty statute, a discretionary object had no “interest” at all so that it was unnecessary to decide whether it was in possession or not. They did not expressly adopt a contextual or purposive interpretation as that was not then fashionable but that is what they did as regards the structure of the tax. In Pearson [1980] AC 753 where Gartside was cited they decided to interpret “interest in possession” according to the ordinary and natural meaning of the words as Parliament intended, which seems more like the literal interpretation.

In a recent case of Harvey v Van Hoorn [2023] EWHC 1298 (Ch) Harvey & Anor v Van Hoorn [2023] EWHC 1298 (Ch) (31 May 2023) HHJ Paul Matthews had to decide on the meaning of interest in the context of VTA 1958 as regards the objects of a power. Here it is settled law that the statute specifically extends to discretionary beneficiaries of a trust. He adopts a contextual construction as is now the fashion and finds that in this Act, noting it is not a tax stature, the object of a mere power has the requisite “interest”. He remarks that on authority in s32(1)(c), consent of any person in existence of full age “entitled to any prior life or other interest, whether vested or contingent”, such an object does not have the requisite “other interest”: Bernstein v Jacobson [2008] EWHC 3454 (Ch) per Blackburne J.

I agree that in s36(9) contextually a discretionary beneficiary does not have an “interest in the trust property” let alone one in possession and nor would the object of a power. The same is true of s32 as regards prior consent: theirs is not required. But they all have an “interest” under the VTA permitting the Court to make an order on their behalf. The meaning of “interest” depends on the context relevant to the particular statutory provision in which it appears.

Jack Harper