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Changes in Trustees - Who Appoints New Trustees?

Trusts are relatively common and the death of a trustee is by no means rare. A trust deed normally contains a clause stipulating how new trustees are to be appointed in the event of the death, incapacity or inability to serve of a trustee, and normally it is the settlor of the trust who retains the power to appoint trustees.

The Trustee Act 1925 (Section 36) provides that the right to appoint new trustees will rest with the persons 'nominated for the purposes of appointing new trustees' in the trust deed or, if there is no such person capable, the 'surviving or continuing trustees, or the personal representatives of the last surviving or continuing trustee'.

So when a trustee of a family trust died, the settlor having already died without making provision for the appointment of new trustees after his death, all seemed straightforward. However, three of the four trustees and the adult beneficiaries of the trust proposed to amend the trust deed to allow the principal beneficiary of the trust to appoint new trustees with the written agreement of the current trustees. The fourth trustee did not agree, advancing several reasons why allowing the trustees to choose any new trustees but giving the principal beneficiary a veto would be a preferable approach.

The judge hearing the case considered that there was little to choose between the two methods and, since the majority of the trustees and all the beneficiaries favoured one method, that arrangement was to be preferred.

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    The case was argued in the High Court by three barristers, one a Queen's Counsel, and the costs of obtaining a decision on this small point will have been very considerable. Setting the terms into the trust deed in the first place could have avoided the subsequent argument and cost.

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