mCW Trust Series
The Trusts Bill 2024 (Qld) (Proposed Bill), introduced into the Queensland Parliament on 21 May 2024, aimed to modernise and simplify the existing Trusts Act 1973 (Qld) (Existing Act). The Proposed Bill lapsed upon the dissolution of the Queensland Parliament on 1 October 2024. This means that the Existing Act remains in effect until the Proposed Bill is re-introduced into Parliament, has been passed and receives royal assent. We consider it likely that the Queensland Parliament will re-introduce the Proposed Bill and take steps to achieve its goal of modernising and simplifying the Existing Act.
To address these potential changes and common questions regarding trusts, the McInnes Wilson Lawyers (MCW) Tax and Private Advisory Services team has created the MCW Trust Series, covering:
- Who can be appointed as a trustee of a trust?
- How are trustees removed and appointed?
- What are the powers of the trustee?
- Can the trustee delegate their powers?
- What are the duties of the trustee?
- What are the rights and obligations of beneficiaries of a trust?
- When does a trust become a foreign trust?
This article explores the second of seven topics: How are trustees removed and appointed? Future articles will delve into the remaining topics available at the links above.
We note that the MCW Trust Series considers the trusts legislation in Queensland. If you have questions about trust legislation outside Queensland, please contact us for tailored advice.
key takeaways
What is a trustee?
The trustee of a trust is a person or company appointed to manage the day-to-day operations of a trust. This includes managing assets, engaging professional advisors (e.g. financial advisors, accountants or lawyers), and distributing income or capital from the trust to beneficiaries.
rules governing trusts
Broadly, in Queensland, trusts are governed by:
- the trust deed; and
- the Existing Act (or potentially the Proposed Bill).
In order to determine who can be the trustee of a trust, it is necessary to consider both the trust deed and the Existing Act.
trust deed - How are trustees appointed and removed?
The trust deed will record the establishment of the trust and will generally set out the rules, powers of the trustee, and the rights of any beneficiaries of a trust. It typically specifies the process for appointing and removing trustees.
Commonly, a trustee is removed following specific events, such as death or incapacity of an individual trustee, or the deregistration, liquidation or voluntary administration of a corporate trustee.
Trust deeds often empower an appointor (sometimes referred to as a principal or guardian) to appoint and remove a trustee. The process for exercising this power, such as signing a deed of appointment or removal, is usually detailed in the trust deed.
It is important to review the terms of the trust deed to ensure compliance with its requirements when appointing or removing a trustee.
Act and Bill – How are trustees appointed and removed?
The Existing Act applies to all trusts governed by Queensland law, outlining a range of powers, obligations and entitlements of parties involved in a trust.
The Proposed Bill confirms its application to all trusts governed by Queensland law, regardless of whether the trusts were established before or after its commencement. It also overrules any conflicting provision in the trust deed (unless explicitly permitted by the Proposed Bill).
We outline the relevant provisions of the Proposed Bill and Existing Act below.
court powers
Both the Existing Act and Proposed Bill grant the court power to appoint or remove trustees where it is necessary or expedient. The Proposed Bill further clarifies that courts can appoint or remove trustees upon application or on their own initiative.
The Proposed Bill also expands the court’s powers to include appointing or removing officeholders (such as directors or secretaries) of a corporate trustee when it is expedient, and other avenues are unavailable or impracticable.
Appointment and Removal of Trustees
The Existing Act currently allows the person with the power of appointment under the trust (generally, the appointor) the authority to replace a trustee in situations such as where the trustee is:
- deceased, incapable or unfit to act or refuses to act;
- a child;
- remains outside of Queensland for more than a year (without properly delegating their powers)
- wishes to be discharged as trustee; or
- is a corporation and ceased to carry on business, is under official management, is in liquidation, or has been dissolved.
Where there is no person with the power of appointment who can act, the trustee(s) of the trust can exercise these powers.
The Proposed Bill modernises the rules in the Existing Act by:
1.
2.
removing outdated grounds for replacing a trustee, such as absence from Queensland for more than a year; and
expanding circumstances for removal, including:
a.
where an individual trustee becomes bankrupt or is disqualified from managing corporations; and
b.
where a corporate trustee has stopped carrying on a business, gone into liquidation or administration, or has been deregistered or otherwise ceased to exist.
Neither the appointor nor the trustee is required to exercise this power unless they wish to. These provisions ensure a mechanism exists to remove trustees in the above situations, when necessary or desirable to do so.
The Proposed Bill confirms that the appointor can appoint themselves as a trustee, provided the trust deed does not prohibit this.
Replacement of Trustee upon Death
Upon the death of the sole trustee, the Existing Act provides that the legal personal representative of the deceased trustee (e.g. the executor of the deceased’s estate) can appoint a replacement trustee, where no appointor is willing or able to act.
The Proposed Bill refines this by confirming that the legal personal representative can only exercise this power if the appointor is unable to act and the trust deed does not provide an alternative mechanism. It also allows the legal personal representative of the deceased to appoint themselves as trustee, provided the trust deed does not prohibit it.
Replacement of Trustee upon Incapacity
Currently, the Existing Act does not address replacing a sole trustee who has lost capacity where no appointor or trustee is available to appoint a replacement. This often necessitates a court application.
The Proposed Bill attempts to address this gap by empowering the administrator or attorney of the incapacitated trustee to replace them, subject to certain conditions:
- the administrator or attorney must have authority to manage the incapacitated trustee’s financial matters; and
- the appointor and any other person with the power to appoint and remove the trustee must be unable or unwilling or act.
The Proposed Bill confirms that the legal personal representative of the deceased can appoint themselves as trustee.
This new power is limited by any contrary intention expressed in the trust deed, the order appointing the administrator, or the document appointing the attorney (e.g. enduring power of attorney).
For example, if an enduring power of attorney explicitly prohibits the attorney from dealing with the trust, or if the trust deed includes alternative succession mechanisms, the attorney cannot appoint a new trustee. The attorney also cannot appoint themselves as trustee where the enduring power of attorney or trust deed prohibits this.
Estate planning considerations
The succession of a trustee and appointor, including the requirements to remove and appoint a trustee or appointor, should be considered as part of the estate planning process for any trustee or appointor of a trust.
It is important to have mechanisms in place to ensure that, upon the incapacity or death of a trustee or appointor, the trust can continue to operate smoothly and that the control of the trust will be passed to the intended person. Where the trust deed allows it, the appointor (and in some cases, the trustee) may wish to take steps to nominate a successor to take over their role upon their incapacity or death. It is important that any nomination is done in a manner consistent with the terms of the trust.
You are welcome to contact us if you would like to discuss your estate planning or trust succession further.
Powers of the trustee
Trustees are generally granted broad powers to manage trusts and its assets. These powers may be modified by the Proposed Bill.
The next article in our MCW Trusts Series explores powers of the trustee and the changes to these powers under the Proposed Bill. Click here to read more.
conclusion
A thorough review of the trust deed is essential to understand how trustees can be appointed and removed. This is a key consideration in the estate planning process to ensure that the right individuals can take over trust management in the event of the death or incapacity of a trustee.
Both the Existing Act and Proposed Bill set out who can exercise these powers where the individuals nominated in the trust deed are unable or unwilling to do so.
The Proposed Bill also provides important mechanisms for appointing new trustees in situations where no appointor or alternative is available, particularly addressing issues of sole trustees losing capacity. These changes can help trusts continue operating smoothly in the event something unexpected happens.
how can mcw help?
Contact Emily Ryan or Kimberley Barnes from our Tax and Private Advisory Services team if you would like to discuss who can be appointed as a trustee of a trust, or if you would like to discuss trusts generally.
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