Edith and Jim had set their trust up many years ago. They had owned a carpet cleaning business and had set the trust up on the recommendation of their accountant in the mid 1990s. The business had been sold in 2005 and the trust now owned their family home and an investment in managed funds which was the sale proceeds of the business. Their accountant was their independent trustee, and they felt that they had been running their trust properly. They had annual meetings and their accountant prepared a tax return and financial statements for the trust each year.

Edith and Jim were now in their late 70s, and Edith was starting to notice Jim’s decline in capabilities. He was starting to get quite forgetful, and Edith started to worry about him. Jim was adamant that there was nothing wrong, until the day when he went to drive home after they had been to the supermarket and he couldn’t remember how to get home. Edith suggested he go and see a geriatrician, and also their lawyer to make sure that they had enduring powers of attorney in place so that she could act on Jim’s behalf if he completely lost capacity.
A year or so later, Jim’s health had continued to decline to the point that Edith could no longer look after him at home and the powers of attorney had been invoked. She decided it was time to sell the family home and move into a retirement village where she would be able to live in an apartment and John would have the hospital care he now needed. However, when she went to list their family home for sale, she ran into problems. When John and Edith had been to see their lawyer the previous year, their lawyer had put in place powers of attorney but had failed to tell them that the powers of attorney had nothing to do with the trust. You cannot delegate you authority as a trustee to your attorney under a power of attorney. Unfortunately John and Edith’s trust deed also didn’t provide for who would be able to remove and appoint trustees in the event that one of them lost capacity.
This meant that Edith and their accountant trustee had to make an application to the Court to remove John as a trustee and also vest the family home and other assets in their names.
The new Trusts Act 2019 addresses this issue, which is not dealt with in many trust deeds, and from January 2021, incapacitated trustees will be able to be removed without a Court application. For more information, please do not hesitate to contact me.

Tammy McLeod, 09 915 4386
tammy@dhlawyers.co.nz