Appointment and Removal of Trustees
Trusts > Appointment and Removal of Trustees
Candidates frequently lose marks because they confuse who has the power to appoint new trustees (the settlor, existing trustees, or the court) and the conditions under which removal is available, particularly when statutory provisions are modified by trust deed.
What Is Appointment and Removal of Trustees in SQE1?
Over the life of a trust, trustees may retire, die, or become incapable. New trustees must be appointed, and in some cases, existing trustees must be removed. The power of appointment and removal comes from three sources: the trust deed, statute (principally the Trustee Act 1925, s.36 and Trustee of Land and Appointment of Trustees Act 1996, s.19), and the court. Understanding who has the power to appoint and remove, and on what conditions, is essential to advice on trust management.
Trust deed provisions typically control appointment and removal, but statute provides default powers and safeguards where the trust deed is silent or inadequate.
This topic connects closely to trustee duties and powers and is a key part of the Trusts syllabus for SQE1.
Key Principles for SQE1
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Appointment by the Settlor: The settlor may be given express power in the trust deed to appoint trustees. A power of appointment given to the settlor is personal and cannot be delegated unless the trust deed permits. The settlor can exercise this power before or after the settlor's death (if the power extends to the period after death).
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Appointment by Existing Trustees (Trustee Act 1925, s.36): The existing trustees can appoint new trustees if the trust deed permits or by statute. Section 36 TA 1925 permits a trustee (or the personal representatives of a deceased trustee) to appoint a new trustee in place of a trustee who has died, has retired, has been removed, remains outside England and Wales for more than 12 months, or becomes unfit. An appointment under s.36 must name a successor specifically; it is not a general power to appoint additional trustees.
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Appointment by Beneficiaries (Trustee of Land and Appointment of Trustees Act 1996, s.19): If the beneficiaries are of full age and capacity and together entitled to the whole beneficial interest, they can appoint and remove trustees jointly. This is a significant power: if all beneficiaries consent, they can force out a trustee and install a new one. However, the trust deed can modify or exclude this power.
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Removal by the Court (Trustee Act 1925, s.41): The court has inherent jurisdiction to remove a trustee if it is expedient to do so. "Expedient" is broadly construed; it includes cases where the trustee has breached trust, is unfit, is in conflict of interest, or where removal is in the interests of the trust's management. The court also has power under s.41 to appoint a new trustee in place of one removed.
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Conditions on Appointment: When appointing trustees, the trust deed may impose conditions: minimum and maximum numbers, requirements for consent of beneficiaries or others, restrictions on who can be appointed, or procedures. Statutory appointment powers are subject to these trust deed conditions.
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Minimum and Maximum Numbers: Many trust deeds specify that there must be at least one trustee and at most a certain number (e.g., four). Where a trust deed specifies a minimum (e.g., two trustees), a new trustee must be appointed if the number falls below the minimum. Where it specifies a maximum, no new trustee can be appointed unless the number has fallen below the maximum.
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Retirement of Trustees: A trustee can retire if the trust deed permits and a new trustee is appointed (or the remaining trustees continue). The Trustee Act 1925, s.36 permits retirement if a new trustee is appointed to replace the retiring trustee. A trustee cannot retire if doing so would leave no trustee in office.
Exam tip
A common mistake is assuming the existing trustees always have power to remove a fellow trustee. They do not: s.36 TA 1925 permits appointment of a new trustee but requires grounds (death, retirement, unfitness, etc.). Removal requires separate court order under s.41. Only the beneficiaries (under s.19 TLATA 1996) can remove a trustee without court order, and only if they are of full age and capacity and entitled to the whole beneficial interest.
How This Appears in SQE1 Questions
A scenario might be: "T1 and T2 are trustees of a trust for A, B, and C. T2 wishes to retire, and the remaining trustees wish to appoint T3 as a replacement. The trust deed states that there must be at least two trustees at all times. Can T2 retire?" The answer requires understanding s.36 TA 1925 (T2 can retire if T3 is appointed in replacement) and the trust deed requirement (the minimum number must be maintained).
This is a classic SQE1 trap.
Common Mistakes Students Make
- Confusing the power to appoint new trustees (which existing trustees may have) with the power to remove existing trustees (which requires court order or beneficiary agreement)
- Overlooking the "unfit" ground in s.36 TA 1925; trustees can be appointed to replace an unfit trustee without waiting for the unfit trustee to die or retire
- Assuming the beneficiaries' power to appoint and remove under s.19 TLATA 1996 is absolute; it can be excluded or modified by the trust deed
- Misidentifying what "expedient" means under s.41 TA 1925; it is broad but requires grounds (unfitness, conflict of interest, breach, or management necessity)
- Treating the minimum and maximum number requirements in trust deeds as merely advisory; they are binding on anyone exercising power to appoint
Quick Summary
- The settlor may give power to appoint trustees in the trust deed; this power is personal and cannot be delegated unless the deed permits.
- Existing trustees can appoint a new trustee under s.36 TA 1925 if grounds exist (death, retirement, unfitness, etc.).
- Beneficiaries of full age and capacity, entitled to the whole beneficial interest, can appoint and remove trustees under s.19 TLATA 1996 (subject to trust deed restrictions).
- The court can remove a trustee under s.41 TA 1925 if it is expedient to do so, and can appoint a replacement.
- Trust deed conditions on the number of trustees and on appointment procedures bind anyone exercising appointment power.
Want to test this now? Try a few SQE1-style questions below before moving on.
Test Yourself
Test yourself
Quick check questions based on this article.
Question 1
Scenario
A trust was established by will for the benefit of the testator's two adult children in equal shares. The sole trustee is a retired solicitor who agreed to act without remuneration. The trust fund consists of a portfolio of listed equities valued at a significant sum. The trust instrument is silent on the trustee's investment powers. The trustee decides to invest the entire trust fund in shares of a single technology company after reading a favourable article in a financial newspaper. He does not take professional financial advice before making the investment. The trustee has no personal expertise in technology investments. The trust instrument does not exclude or restrict the statutory duty of care. Within six months, the technology company issues a profit warning and its share price falls by sixty per cent. The beneficiaries discover the investment and demand that the trustee compensate the trust for the loss. The trustee argues that he acted honestly and in what he believed to be the best interests of the beneficiaries. He also argues that the financial newspaper article constituted sufficient research. One of the beneficiaries is a professional fund manager who had previously offered to advise the trustee on investments but was declined. The trustee has been managing the trust for seven years without any prior complaint from the beneficiaries. The trustee has personal savings but they are modest compared to the loss suffered by the trust.
Which of the following best describes the trustee's liability for the investment loss?
Question 2
Scenario
A testamentary trust established under a will provides that the trust fund is to be held for the testator's granddaughter contingent upon her attaining the age of twenty-five. The granddaughter is currently nineteen years old and has been offered a place at a prestigious art school in another country. The tuition fees are substantial. The trustees wish to pay the tuition fees from the trust fund. The trust fund is valued at a significant sum, invested in a diversified portfolio. The trust instrument does not modify or exclude the statutory powers of maintenance and advancement. The granddaughter's mother, who is the life tenant under a separate provision of the same will, consents in writing to the proposed payment. The granddaughter has no other means of funding the tuition fees and has been working part-time to support herself. One of the trustees is a retired art dealer who has personal knowledge of the art school and considers it an excellent institution. The other trustee is a solicitor who has no connection to the art world. The granddaughter's father, who is not a beneficiary under the trust, objects to the proposed payment on the basis that the granddaughter should complete a law degree instead. The trustees are uncertain whether they have the power to make the payment before the granddaughter reaches twenty-five. The trust was created after 1 October 2014.
Which of the following best describes the trustees' power to pay the tuition fees from the trust fund?
Question 3
Scenario
A family trust was established by deed twenty years ago for the benefit of the settlor's three children. The trust originally had three trustees: the settlor's brother, his solicitor, and a family friend. The settlor's brother died five years ago. The solicitor retired from practice and wishes to retire as trustee. The family friend remains willing to act but is now the sole remaining trustee. The trust instrument contains no power of appointment of new trustees. The settlor died ten years ago and made no provision in his will regarding replacement trustees. The beneficiaries are all adults and have been receiving income from the trust. Two of the beneficiaries are in agreement about who should be appointed as a new trustee, but the third disagrees. The trust fund includes both land and investments. The family friend has been managing the trust competently. The family friend's health has been declining, but she has not expressed any wish to retire. The solicitor writes to the family friend confirming his intention to retire as trustee. He has identified a suitable replacement but wants to know who has the power to appoint. The beneficiaries are concerned about the trust having only one active trustee, particularly given the trust holds land. A local accountant has expressed willingness to act as trustee if appointed.
Which of the following correctly identifies who has the power to appoint a new trustee in place of the retiring solicitor?
Practice with full exam-style questions
Related Topics
- SQE1 Trusts: Complete Guide
- Trustee Duties and Powers
- Breach of Trust and Remedies
- Beneficiaries' Rights
Practise Appointment and Removal of Trustees Questions for SQE1
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