TALKING TRUSTS: EDITH & JIM
By Tammy McLeod
Edith and Jim had set their trust up many years ago. They had owned a carpet cleaning business and had set the trust up following the recommendation of their accountant in the mid-1990s. The business had been sold in 2005 and the trust now owned the couple's family home and an investment in managed funds, which was the sale proceeds of the business.
Edith and Jim's accountant was their independent trustee, and the couple believed 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 70’s, 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. He was adamant that there was nothing wrong, until the day he went to drive home after they had been to the supermarket and couldn’t remember how to get home. Following this event, 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 your authority as a trustee to your attorney under a power of attorney. Unfortunately, John and Edith’s trust deed also did not provide for who would be able to remove and appoint trustees if either of them were to lose capacity.
Consequently, 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.
Incapacitated Trustees and the Trusts Act (2019):
The new Trusts Act (2019) addresses these issues surrounding incapacitated trustees, which is not dealt with in many trust deeds. From January 2021, incapacitated trustees will be able to be removed without a Court application. For more information, please do not hesitate to contact myself (contact details below), or any member of our Trusts Team.