A trust will typically have at least two trustees. However, at some point during the life of a trust, trustees may retire, die, or simply want to stop being a trustee. It is, therefore, common for trustees to be replaced or for new trustees to be appointed during the duration of the trust.
Appointment of additional trustees
It may be necessary for the number of trustees originally appointed by the settlor (the person who settles property or money on trust) to be increased by the appointment of new trustees. This may be because the trustees’ workload has increased or become more burdensome, or for simple reasons of convenience.
In the case of land, if the settlor has created a trust for sale with a single trustee it will be necessary to appoint at least one additional trustee so that on the sale, the purchaser can buy the property free of the beneficial interests under the trust. This is an important principle called ‘overreaching’.
Appointment of replacement trustees
It may be necessary to appoint new trustees to replace those who are no longer able to act as trustee, for example, because of retirement, illness, mental incapacity or death.
Removal of trustees
In some circumstances, it may be necessary to remove a trustee from the trust against their will, for example, if the trustee proves to be incompetent or is frustrating the efficient exercise of the trust. However, the trustees have a duty to act in the best interests of the trust and its beneficiaries.
Power to appoint new trustees
How can new trustees be appointed? This depends on the express terms of the trust in question, and general trust law.
The trust deed may well contain an express power authorising the appointment of new trustees in certain situations, reflecting the settlor’s intentions in creating the trust in the first place. Such a power will be strictly construed, and case law has clearly decided that it is improper for the donee of such a power to appoint themselves as a trustee – they cannot do so.
The procedure for appointing or replacing trustees should be done in accordance with the terms of the trust/governing documentation.
In the absence of an express term in the trust deed, there are statutory provisions governing the appointment and replacement of new trustees.
Section 36 of the Trustee Act 1925 provides for the appointment of new trustees in a wide range of circumstances by those either nominated in the trust deed or, in the absence of any such nomination, by those provided for under s36 without the court’s intervention being required.
Under section 41 of the Trustee Act 1925, the court has a wide discretionary power to appoint new trustees either in addition to, or in substitution for existing trustees. The power may be exercised whenever the court considers it expedient to do so.
Under sections 19 and 20 of the Trusts of Land and Appointment of Trustees Act 1996, the beneficiaries of a trust have the statutory right to direct the compulsory retirement of a trustee. Section 19(2)(b) also grants the beneficiaries the right to direct the appointment of new trustees; and section 20 provides for the appointment of a replacement trustee where a trustee is mentally incapable of acting and there is no person willing and able to appoint a replacement under s36(1) of the Trustee Act 1925.