I have come across a Will Trust where A & B were originally appointed as Trustees. A few years later, B wanted to retire and did so with the consent of A. There are no powers to add or remove Trustees within the Will (that created the trust). So, my understanding is that s39 TA would have been relied on to retire - but that can only be used if there is a Trust Corporation or 2 trustees remaining. That being said, does that simply mean that B has not effectively been retired and is still a trustee?
Additionally, a year later, A (the purported Continuing Trustee) appointed C as a trustee to act with him. Needless to say, B was not a party to this appointment. So, does that also mean that C is not correctly appointed?
C is now being asked to retire, but my feeling is nothing needs to be done - but is that enough protection for her? If the asset holders have incorrectly noted her as an ‘owner’ with A, I can’t see how they will just remove her name without seeing a ‘deed’ of some sort. Any views welcome.
KRS Estate Planning
The situation here, whilst not on all fours with the case of Jasmine Trustees Ltd. V. Wells & Hind EWHC 38 (Ch.) (http://www.bailii.org/ew/cases/EWHC/Ch/2007/38.html), will suffer the same outcome.
B has not been discharged as a trustee and so, despite the purported retirement, the trustees continue to be A & B.
The appointment of C is invalid, as B was not a party to it, and C is a trustee de son tort. This means that C has all the liabilities of acting as trustee, but has no authority to join in the exercise of any of the powers, etc. of the trustees, and is not entitled to any indemnity or other benefits from the trust fund.
Actions taken by A alone, or A and C will have been in breach of trust and consideration will need to be given to how these might be validated/remediated and the situation rectified. An application to court may be required, although if all beneficiaries are adult and between them absolutely entitled to the trust fund, and are in agreement, they could waive the breaches, both those that have already occurred and any that might occur before the situation is resolved.
In any event, unless A and B decide that they would both now continue as trustee, they would need to act together to appoint a new trustee (or trustees) so as to enable any outgoing trustee (whether B and/or A) to be correctly discharged as trustee.
My view is that A & B are still trustees as B did not retire and C was not validly appointed. This has nightmarish possibilities if A and C have purported to exercise discretionary powers. They would be strictly liable for any losses.
It may be possible to resolve this with a deed of retirement of C and appointment ( by A and B) if backed with an opinion from suitably qualified counsel. If it is a heavy case or there are actual losses - e.g. if substantial appointments of capital have been made, then an application to the court would be safer.
Thank you gents. We are attempting to get A & B (and C) to do a fresh Deed of Appointment and Retirement. That being said, and until that is done, would it be wise now for C to not undertake any further action in relation to the trust - now that they know that C’s appointment is not valid.
Luckily, It does not appear as though anything contentious has happened. But i can’t see how (until a fresh Deed is signed correcting the issue), A & C can continue to make decisions without B’s input also.
Is that correct?
KRS Estate Planning
Until they are validly appointed a trustee, C has no standing in the trust. Decisions can only be taken by A and B together.
Even though “it does not appear as though anything contentious has happened” since B purportedly retired as trustee, no trustee actions since that time have been supported by any valid authority. This will include routine payments, investment decisions, etc. This will also include paying the lawyers’ costs of preparing the deed of retirement and subsequent appointment.
Even if B decides to join with A in ratifying all trustee actions taken since their purported retirement, the trustees should let the beneficiaries know what has happened and, perhaps, seek a blanket indemnity from them (or at least those of age), thereby reducing the potential for the matter to be raised against the trustees at a later date. Whilst, in similar circumstances, I have argument that, as a stranger to the trust, C would have no standing to be indemnified by the beneficiaries for actions with which they were involved before being validly appointed a trustee, I see no reason why one should not be requested, although of course any agreement by the beneficiaries will need to be “properly informed”, otherwise C (and a and B) will remain exposed.
The trust is a Discretionary Trust, so would that water down any potential action by ‘Potential Beneficiaries’? bearing in mind they have no expectation of receiving anything. ?The Letter of wishes have been ‘followed’ and the person who has received the main benefit of the trust asset is to become the ‘new’ trustee (lets say, D). I was proposing drafting a Deed of retirement and appointment where A & B ratify all that has gone along so far, and where A,B and D indemnify C for all past actions.
Does this seem appropriate?
KRS Estate Planning
If D is to be the new trustee, that may negate any ability for them to benefit from the trust, mindful of the wider self-dealing rule (see: https://www.lawskills.co.uk/articles/2017/07/beneficiary-trustees-solution-strangulation/).
Noted and thank you, that is not an issue in this case s the Conflict of Interest clause is present. I am more worried about protecting C for her role in the “Trustee de son tort” role - (even though this was with the authority of all concerned).Any suggestions that can avoid the need to go to Court are gratefully welcome.
KRS Estate Planning