“Planning is bringing the future into the present so that
you can do something about it now”
– Alan Lakein

The Trusts Act 2019 has brought an important solution for trusts where the people involved have become mentally incapacitated, i.e. due to an accident or through dementia or Alzheimer’s.

The change
Now, if a trustee loses the capacity to perform the functions of a trustee and they also hold the power of appointment of trustees, there is the ability (among other options) to have the person who holds an enduring power of attorney over the property for that incapacitated trustee to update the trustees by removing the incapacitated trustee and appointing a new one if needed.
This is a major change because the previous law meant that the trust would go into a state of limbo until an application to the Court could update the trustees to exclude the incapacitated person. Therefore, the Trusts Act 2019 has simplified the process of changing trustees in such circumstances. However, to be able to take advantage of that, it is important that trust deeds be worded to take account of the new options, and that people strongly consider having powers of attorney put in place.

Example
You and your partner have set up a family trust, which holds your family home and life insurance policies. You, your partner and an independent trustee company are the trustees of the trust, and you and your partner have the joint power to appoint and remove the trustees  Your partner falls sick and is diagnosed with an illness that affects their mental capacity and they can no longer function as a trustee.
Before the Trusts Act 2019, you would have needed to apply to the court to have your incapacitated partner removed, because the power of removal had to be carried out with that partner’s involvement, which they can no longer give.
Now, under the new rules, the person holding an enduring power of attorney over the property for the incapacitated partner can remove that incapacitated person from involvement as trustee.

What should you do?

We would advise two things:
(1) Have Prudentia Law review the wording of your trust deed so that it fits in line with the new laws;
(2) Set up enduring powers of attorney so that you have that extra layer of certainty that if there is a situation of incapacity, it can be dealt with quickly and efficiently.