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Removal of incapacitated trustees under the new Trusts Act 2019

The new Trusts Act 2019 has had a far-reaching impact on all aspects of trust law.

One of its very sensible and practical amendments is to assist in streamlining the process when a trustee under a trust becomes incapacitated. The outcome is that, where a trustee has lost mental capacity and is deemed medically unable to carry out the trustee function with its related duties, they may be relieved of those duties.

The regular focus on trust administration will mean that trustees’ mental capacity will likely be considered on an ongoing basis, however there are currently many trusts with incapacitated trustees.

Prior to the new Act coming into force, the removal of such a trustee required an application to the Court. While the outcome was a foregone conclusion, the time and costs associated with that application often had an impact on the ongoing workings of trusts. As trustee decisions are personal to each trustee and cannot be delegated under a Power of Attorney, an incapacitated trustee brings all that decision making to an immediate halt.

The new Act creates a new process; a Court order is no longer required. A statutory declaration may be completed alongside the relevant trust resolution, which outlines the nature of the incapacity while providing supporting medical evidence (e.g. a letter from a qualified medical practitioner confirming mental incapacity of a trustee). In many instances, trustee changes are required to be shown on titles of property owned by trusts. Land Information New Zealand will accept this statutory declaration as a basis for updating the relevant titles to reflect the trustee change.

The Trusts Act 2019 has now provided a more common-sense approach. However, your lawyer still needs to be in the loop.