What To Do If A Trustee Loses Capacity

The loss of capacity means they are unable to continue in their role as trustee.

If they have an attorney who acts for them in relation to their property and financial affairs, they can’t step in and act in relation to trust matters, as trusteeships are personal to an individual.

You should seek advice from a solicitor as there are different procedures depending on if there is more than one trustee remaining and whether the incapable trustee has a beneficial interest in the trust property or not.

Below are some key points but full legal advice should be sought on your circumstances.

Trust Deed

Check the Trust Deed. Does it have an express power of removal of trustee? Some Trusts may have a provision to say if a trustee loses capacity that the trustee is to be treated as if he/she is dead.

Implied Powers

If there is no express power, then the incapable trustee can usually be replaced under section 36(1) of The Trustee Act 1925 by his/her co trustees.

However, if a trustee has an interest in possession in the trust property his/her co trustees must obtain permission from the Court of Protection to remove them.

Property Sale

Where a trustee has executed a power of attorney, the attorney can only act on behalf of an incapacitated trustee if the trustee has a beneficial interest in the land to appoint a new trustee, and only in relation to the sale not other trustee functions.

If the trustee does not have a beneficial interest, then an attorney cannot act on their behalf.

Where there is no surviving capable trustee, an application cannot be made under section 36 and instead an application under section 54 Trustee Act 1925 needs to be made by the proposed new trustee to appoint replacement trustees. This usually arises where there is a trust of land as a result of husband and wife owning the property, one dying and the survivor losing mental capacity. The trustee has a beneficial interest in the land, and they are the sole surviving trustee, but they lack capacity.