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Trusts play an essential role for many people in New Zealand, whether by managing family assets or operating a business. Trustees are key figures within trusts, managing day-to-day business and having responsibility for the trust’s assets. Because of this, having an incapacitated trustee whether due to illness or death can be a severe problem. This is particularly because that trustee is no longer able to retire as trustee. You may also need to consider appointing a new (or successor) trustee. This article sets out why you might want to remove a trustee, who has the power to remove a trustee and other considerations around removing a trustee, such as how to appoint a new trustee or successor trustee.

Why Remove a Trustee?

Trustees are the key individuals or businesses involved in managing a trust. The trustees control the distribution of the trust’s income and other trust assets. They help distribute these assets to the beneficiaries, as set out in the trust deed

Because trustees have this critical role, there can be serious issues if they can no longer fulfil their obligations. This might be because the trustee: 

  • has died;
  • is unfit for the role or refusing to fulfil their role; or
  • no longer wishes to be a trustee, usually because they want to retire.

In the first two scenarios, a trustee is either unable to or unlikely to retire themselves. Hence, you should remove them and potentially appoint a new trustee. This is relatively common for long-term trusts. Because you can set up trusts for a long period (typically 80 years in New Zealand), many people face the issue of how to remove a trustee who is too old or incapacitated. A key part of this scenario is determining who has the power to remove a trustee.

Who Has the Power to Remove a Trustee?

In New Zealand, it was historically quite a complicated process to remove an incapacitated trustee. However, it has been streamlined and simplified by the Trusts Act 2019, which came into effect 30 January 2021. The law provides that: 

  • the person named in the trust deed with the power to remove trustees may remove trustees;
  • if no one is named in the trust deed as having the power to remove trustees, or the person who does is unwilling or unable to act, then the remaining trustees have the power of removal; and
  • if no one is named in the trust deed with the power to remove trustees and there are no remaining trustees who can, then the power falls to either:
    • a person holding an enduring power of attorney over the property of a mentally incapable trustee; or 
    • a property manager appointed under the Protection of Personal and Property Rights Act 1988 to manage the trustee’s property.

It follows that the trust deed should set out the person with the power to remove trustees. Likewise, in most other cases, the power will fall to the other trustees. If the trust deed relating to your trust is not clear on this point, you should seek legal advice. Engaging a lawyer is particularly vital if one of your trustees is incapacitated. 

How Does the Process for Removing a Trustee Work?

There are a few essential issues to consider when removing a trustee. One such element is the notice period. When removing a trustee, you must give them 20 working days’ written notice for their removal. However, if the trustee has a property manager appointed or a trustee corporation managing their property, the notice will take effect immediately.

You will also need to ensure all necessary parties sign the deed when removing the trustee (and appointing any replacement trustee). This deed will ensure that the trust property ownership is taken away from existing trustees and vested in the new or continuing trustees. You can then provide a copy of the deed (together with a statutory declaration by the new or continuing trustees) for any matters where you must notify or register the change formally.

For example, if the trust owns land, it must update the title. You should seek legal advice on the form of this deed to ensure it operates in this way. 

The trust deed is again the most important document to check first in terms of who can appoint a replacement or successor trustee. The trust deed will generally specify who can appoint a replacement trustee. If the trust deed does not specify this, or the appointed person is unable or unwilling to act, then who can do so depends on the reason for the replacement. For instance, if a trustee has retired or has died, the remaining trustees can appoint a replacement trustee. 

Key Takeaways

There are many reasons why you may want to remove a trustee from a trust in New Zealand. This is particularly if you have an incapacitated trustee or they cannot otherwise fulfil their duties as a trustee. To change the trustee of your trust, you should first refer to the trust deed. Note which person has the power to remove trustees (and appoint a new or successor trustee). It can be a good idea to get legal advice if the trust deed is not clear on this point, as the power will then typically fall to the remaining trustees of the trust.

If you want to know more about how to remove trustees from different trusts, contact LegalVision’s New Zealand business lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

Who can remove a trust’s incapacitated trustee?

Whoever receives that power in the trust deed. If the trust deed does not clearly set out who has the power to remove trustees, the remaining trustees can do so.

Can a replacement or successor trustee be appointed?

Yes, a new trustee can be appointed. The trust deed should set out the process for appointing a replacement or successor trustee. Again, if it does not do so, the remaining trustees can usually appoint a new trustee.

How much notice should removed trustees receive?

Removed trustees should receive at least 20 working days’ notice.

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