Q&As

What is the position when trustees become personally bankrupt? If they are unable to continue to act, what options are available for the appointment of replacement trustees?

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Published on LexisPSL on 21/12/2016

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • What is the position when trustees become personally bankrupt? If they are unable to continue to act, what options are available for the appointment of replacement trustees?
  • Fitness to act
  • Retirement
  • Removal of trustee
  • Appointment of new trustee

What is the position when trustees become personally bankrupt? If they are unable to continue to act, what options are available for the appointment of replacement trustees?

This Q&A is limited to cover the statutory powers relating to the removal and replacement of trustees. There may be express powers and provisions in the trust document.

Fitness to act

Anyone who has the legal capacity to hold the legal title to property may be appointed a trustee of that property, however, a bankrupt trustee may be 'unfit to act' within section 36 of the Trustee Act 1925 (TA 1925) but this need not be the case. For an example of this, see In re Barker’s Trust. For further information, see: Underhill and Hayton: Law of Trusts and Trustees: Paragraph 2.

Retirement

If doubts exist and the trustee is happy to retire then it is best to replace them on the grounds of retirement.

A trustee may retire in a number of ways including by taking advantage of any provision in the trust instrument, or, if someone can be found to replace them, they may retire under the provisions of TA 1925, s 36.

For further information, see Practice Note: Trustees—retirement of trustees and the case In re Adam’s

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