Maintaining your trustee


Your trust shouldn’t face the difficulties of trusts without trustees.  In NSW if all else fails then you might be able to rely on failsafe provisions in the Trustee Act (NSW) 1925 but it is inadvisable to rely on them unless all else fails….
For instance, a trust deed can provide for appointment of new trustees by appointors or existing trustees.  Even in the absence of trust deed powers given to someone to appoint new trustees, the appointment of a company as a trustee goes a long way to ensuring perpetual succession of the trustee.  Individual trustees can die, lose legal capacity (or not attain it if the person appointed is under age 18) and are more likely than a corporate trustee to resign as trustee.
But let’s say your trust has ignored these opportunities and the sole individual trustee loses mental capacity due to infirmity leaving your trust with no trustee.  Or your trust does have another trustee but the trust deed provides that at least two trustees are required to act.  What can beneficiaries do?
All States have legislation that can help.

In NSW the Trustee Act allows appointment of a new trustee:

  • where a trustee is dead;
  • where a trustee remains out of New South Wales for more than one year without having properly delegated the execution of the trust;
  • where a trustee remains out of New South Wales for more than two years;
  • where a trustee desires to be discharged from their duties;
  • where a trustee refuses or is unfit to act or is incapable of acting, or is a minor;
  • where a trustee is removed under a power contained in the instrument creating the trust; and
  •  where a trustee being a corporation is dissolved.
The Act (NSW) also permits the following persons to appoint a new trustee:
  • the person/s nominated in the declaration of trust; or
  • if there is no such person, or no such person able and willing to act, then by the surviving or continuing trustees or trustee for the time being, or by the legal representative of the last surviving or continuing trustee.

In the absence of someone empowered under either the trust deed or the Trustee Act to appoint a new trustee, (and persons under age 18 are not empowered), beneficiaries would need to apply to the Supreme Court for it to exercise its powers under Part 3 Division 1 of the Trustee Act.  Such an application would be expensive.
Care should be taken to ensure the succession of trustees by appointing a company, if appropriate, ensuring the trust has governing rules which allow for the orderly continuation of trustees or both. If you would like more information, please do not hesitate to contact Townsends Business & Corporate Lawyers on (02) 8296 6222.