Retiring Trustee

Trusts Discussion
1

Dear All

I should be grateful for some guidance.

I have a trustee who is also in the class of beneficiaries of a Discretionary Trust (DT).

The trustee has been diagnosed with early onset dementia however I have been informed that on a “good day” he will be able to acknowledge that he is retiring as trustee of the trust.

I am unsure, having looked at Section 36(9) Trustee Act 1925, (as he is in the class of beneficiaries of DT) whether I need to apply to the Court of Protection for permission for him to retire?

Does being in the class of beneficiaries of a DT mean the trustee has “some beneficial interest in the trust property” as stated in S36(9).

Thank you

2

If the trustee is retiring voluntarily, as seems to be suggested, they are not being removed under s.36(1) and s.36(9) is not therefore engaged.

In any event, as a member of a class of discretionary beneficiaries they do not have a sufficient interest in the trust fund for s.36(9) to be engaged.

The important factor is whether their retirement will leave in place 2 trustees or a trust corporation (s.39 Trustee Act 1925). If it does, then so long as they execute the deed of retirement on a “good day” all should be well.

However, if s.39 would not be complied with on their retirement, unless there is someone other than the trustees with power to appoint a replacement trustee they will need to be party to the appointment of their replacement. Whilst they might have capacity to retire, would they have capacity to appoint their replacement, mindful of the issues that would entail?

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

3

Thank you so much for this Paul, much appreciated.

Current trustees are Husband (who has early onset dementia) and Wife (who has capacity).

Proposed plan is to retire husband and in replacement, appoint their two daughters.

Kind regards

4

Is it appropriate to appoint the daughters?

Unless there is provision in the trust instrument enabling trustees to act to befit themselves, the appointment of the daughters as trustees would exclude them from benefit.

Even if the STEP Provisions apply, an Independent Trustee would also need to be appointed if there is any intention for either daughter to benefit from the trust.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals