September 15 2015
If you set up your trust some years ago, it may be time to consider whether the trustees you appointed are still right for the role. Does a trustee wish to retire? Should you consider changing the trustees of your trust?
Most trusts can last for up to 80 years. If the purpose of the trust is for long-term asset protection (as is the case with many New Zealand trusts) then you should consider appointing people who are willing and able to act as trustee for the long-term. This will assist in the administrative continuity of your trust.
Why change the trustees of a trust?
There are a number of reasons why you may wish to change the trustees of your trust:
- Your trustees may be getting older. The trust could be in real difficulty if a trustee has a stroke, is in hospital long-term or dies. Sometimes dementia, or some other form of medical situation, can creep up on a trustee. By the time anyone realises there’s a problem, it may be too late for the trustee to resign as the ability could be lost to understand and sign legal documents.
- A trustee may be showing signs of, or already have, dementia and may not be able to contribute to the administration of the trust. Most trusts require trustees’ decisions to be made unanimously. It’s not possible to get a unanimous decision when one of your trustees has lost mental capacity.
- The trustees appointed when you set up your trust may no longer be appropriate. You may have appointed someone as trustee who now lives overseas, which can make administration of the trust logistically difficult, although not impossible. Maybe you appointed a family member or an in-law as a trustee and, due to family circumstances, this is no longer desirable.
- You may have appointed an accountant or lawyer as your independent trustee. They may be looking to retire from all trusteeships as they wind down their careers. Possibly the trustee is a previous advisor, who you have no relationship with now. You may be looking for the assistance of a professional independent trustee.
- Perhaps now you have adult children who are among the beneficiaries of the trust. Possibly it’s time for one or more of them to take an active role in the trust administration, particularly if the trust is to continue after your death.
How to change trustees
To change trustees, most trust deeds require a formal deed of retirement and the appointment of new trustees to be signed by the exiting, continuing and new trustees. Sometimes a signature is needed from the person who is given the power to appoint new trustees under the trust deed. If the trust deed is silent on how trustees can be changed, there are some limited powers in s43 of the Trustee Act 1956 to replace a trustee. Trustees can also retire if they no longer wish to continue.
What if your trust owns property?
If your trust owns property, the title to that property (and possibly your mortgage) will also need to show the change in trustees and ownership. Again all the exiting, continuing and new trustees will need to sign the paperwork. There will be some bank and legal fees.
If the title to the property is not updated, this is likely to cause complications later when you come to sell or refinance the property. If a trustee has moved and is hard to locate, has lost mental capacity and cannot sign documents or has died, this will often hold up the sale of properties. In some cases, the trustees have been penalised under the Agreement for Sale and Purchase because of delays or not being able to sign over the title. It’s always important to ensure that the property title is updated at the time the change in trustees occurs.
If your trust owns other assets such as shares or bank accounts, there will also be forms that need to be signed to transfer the ownership of the assets into the new trustees’ names.
It’s important to note that it takes time to complete this change of ownership process, it’s not a five minute job.
Changing trustees can take some time but, despite the procedures we’ve mentioned above, we can help make the change process easier. Before you take any action to change your trustees, get in touch with us and we can help you plan the process.