What happens if a trustee loses capacity

Based on Ministry of Justice data, there are somewhere between , and , family trusts in the country. Over time, many of these trusts have had to address what to do when a trustee loses, or appears to lose, the capacity to perform his or her functions as a trustee. The issue is amplified by New Zealand's ageing population and corresponding increase in related diseases such as dementia.

Determining a loss of capacity itself is a difficult issue. Capacity may diminish over time and the legal tests for assessing capacity vary slightly depending on the legal function being performed. For example, an individual may have the capacity to appoint an attorney to manage his or her personal care and welfare, but may not have the testamentary capacity to change their will.

The new Trusts Act which came into force at the start of this year has introduced mechanisms for dealing with trustees who lose capacity. Prior to its enactment, a trustee who lost capacity could only be removed if there was a power of removal in the trust deed. Otherwise, a court order was necessary. The removal will occur 20 working days from the notice being received. If your trust deed provides a different method of removal, you may elect to choose that method instead of the process in S of the Act.

A common difficulty observed is when the trustee who has lost capacity is also the person named with the power to add and remove trustees in the trust deed. If all the avenues above have been exhausted and the trustee who loses capacity does not have an enduring power of attorney or property manager under the Protection of Personal Property Rights Act , court proceedings are unavoidable.

If you have questions or concerns about your trust, contact our friendly team now. What happens when a trustee loses capacity? The factors we would consider when making an application to remove a trustee who lacks capacity are listed below:. Whether an appropriate capacity assessment by a qualified mental capacity assessor is required;. Whether there is an enduring power of attorney EPA or a lasting power of attorney LPA to act on behalf of the individual who lacks capacity.

Whether the trustee can be removed under the Trustee Act by appointing a substitute trustee, with or without a Court application;. Whether it is necessary in the circumstances to ask the High Court to remove and replace the trustee under the Trustee Act ;.

Whether the beneficiaries authorise an appointment under the Trusts of Land and Appointment of Trustees Act If you require advice on removing a trustee who lacks or is showing signs of losing capacity, please contact Nicola August of our Vulnerable Client Team, or Harvey Barrett of our Trusts and Estates Team on