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Removal of Incapacitated Trustees & Vesting Orders in Trust Property

14 June 2018

Removal of incapacitated trustees & vesting orders in trust property

Incapacity is a legal term of art that means a trustee lacks the mental capacity to manage their own affairs. In the context of trusts, this could lead to the situation where an incapacitated trustee is unable to exercise their duties in the best interests of the beneficiaries of a trust. As trustees of a trust are required to act unanimously, this can make it impossible for the trust to be properly administered and for the trustees to deal with any trust property (for example, entering into any agreement to sell trust property).

The only way therefore for the remaining trustees to continue administering the trust will be to remove the incapacitated trustee (and potentially appoint a new trustee where there is a requirement for a specific number of trustees). The first port of call in determining the process for this is the power of appointment and removal under the trust deed. If this power is vested in a trustee, settlor or other person with capacity, then the removal of the incapacitated trustee can be effected by way of a deed.


In the event that the power of appointment and removal vests in an incapacitated trustee, section 43 of the Trustee Act 1956 (the “Act”) allows for the removal of the incapacitated trustee by the other continuing trustees by way of a deed. However, this section only applies where the incapacitated trustee is replaced by a new trustee.

Where the above situations do not apply, it may be necessary to make an application to the High Court to remove the incapacitated trustee. Such an application can be made under section 51 of the Act, where the intention is to remove the incapacitated trustee and to appoint a new trustee or trustees in their stead. If the the incapacitated trustee is only to be removed with no new trustee to be appointed, then the application will need to be made under the inherent jurisdiction of the High Court. The key factor that the Courts will take into account in deciding whether to grant the application will be whether it is in the best interests of the beneficiaries of the trust and ensuring that the administration of the trust is properly carried out.

Usually, an application in the High Court to remove an incapacitated trustee is also accompanied by an application for vesting orders in the trust’s property under section 52 of the Act. This is to ensure that the new and continuing trustees of the trust are correctly shown as the registered proprietors of the trust’s property (with the incapacitated trustee being removed from the title). The new and continuing trustees of the trust can then properly deal with the trust’s property. These applications will need to be accompanied by affidavits on behalf of the trustees that are not incapacitated and a doctor confirming the incapacity of the trustee(s) in question.

It is likely that some of the processes described above will be amended with the new proposed Trusts Bill, reducing the need to apply to the Court. However, in the immediate future, the processes available for the removal of incapacitated trustees are generally those set out above.

Also, irrespective of any amendments to the law, there may be pre-emptive steps that can be taken by amending and including certain clauses in the existing trust deed to try to some extent avoid a drawn out and expensive Court process. Such amendments can be considered, for example, at annual reviews of the trust.

If there is some concern as to the capacity of a trustee, or you would like to hold an annual review to ensure that the trust administration is up to date, we suggest that you contact us so that we are able to assist you in making the relevant inquiries and advising you on the legal processes.

Source: InBrief Winter 2018, Agent Brief June 2018

InBrief Winter 2018

Agent Brief June 2018

For more information, please contact Wayne Pearson or Kishen Kommu: