Part 4: Trusts Act 2019: Removal of Trustees

Thursday 28 November, 2019

This is the last article in our four-part series on the new Trusts Act 2019. Click here to see the first article where we introduce the Act and discuss some important administrative changes. Click here to see the second article where we look at trustees’ duties. Click here to see the third article where we look at beneficiaries’ rights to trust information.

More and more New Zealand trusts are facing problems due to trustees losing mental capacity from dementia or other age-related issues. Previously, if a trustee lost capacity, they could not retire as a trustee. They had to be removed by the person who had the power to appoint and remove trustees of the trust. An enduring power of attorney in relation to property could not be used to deal with trust property, which was not the personal property of the trustee.

The remaining trustees then had to apply to the Court for a vesting order in order to transfer ownership of the trust property to the new or continuing trustees. This was an expensive and time-consuming process. The situation was even worse if the trustee who had lost capacity was also the person with the power to appoint and remove trustees.

Fortunately, the new Trusts Act makes this process much easier. The Act gives the following people the power to remove a trustee:

• The person named in the trust deed as having the power to remove trustees;
• If no one has the power to remove trustees, or the person who does is unwilling or unable to act, the remaining trustees have the power of removal;
• If no one has the power to remove trustees and there are no remaining trustees who can, a person holding an enduring power of attorney over the property of a trustee who is mentally incapable, or a property manager appointed under the Protection of Personal and Property Rights Act 1988 to manage the trustee’s property.

A person who has the power to remove trustees has to remove a trustee if they lose the capacity to perform a trustee’s duties. The trustee being removed has to be given notice that they are being removed, which takes effect 20 working days after notice is given. If the trustee has a property manager appointed or a trustee corporation managing their property, the notice takes effect immediately.

Vesting of trust property

When an existing trustee retires or is removed, or a new trustee is appointed, executing the deed of appointment, removal, or discharge has the effect of removing ownership of the trust property from the previous trustees and vesting it in the new or continuing trustees without the need for any transfer, conveyance or assignment (subject to any mortgage or liabilities attached to the property). If the divesting and vesting need to be notified, recorded or registered under another Act, such as the Land Transfer Act, a copy of the deed and a statutory declaration by the new or continuing trustees is enough to achieve the change in title. The new and continuing trustees can complete any formal requirements on behalf of a former trustee who has lost capacity.

The process for appointing and removing trustees should become both easier and cheaper under the Trusts Act 2019. If you have any questions concerning appointment or removal of trustees, please contact our Private Client & Trusts team.