There are several ways to transfer trust assets to a new Trustee. In this blog post we will examine two ways in which assets can be transferred to a new Trustee.
1. Keeping The Trust Intact
First, a settlor may decide to leave the Trust intact, with the Trust Deed in place, and simply transfer it to a new Trustee.
The Trust Deed will have to be consulted to determine the proper procedure for appointment of a new Trustee. Those who normally have the power to appoint a new Trustee are:
- Those specified in the Trust Deed. In the case of an irrevocable trust, often only a Protector has the power to remove a Trustee and appoint a new one.
- Those who have statutory power. The law of most jurisdictions provides for statutory removal of a Trustee where he or she is unfit or incapable of acting.
- Beneficiaries, in certain circumstances. When all beneficiaries are sui juris (over 18 and of sound mind) and entitled to the whole beneficial interest, a Trustee may retire with the consent of all of them. They can also agree to have a Trustee removed.
The new Trustee and the outgoing Trustee will agree a Deed of Retirement and Appointment of New Trustee (DORA).
- The new Trustee will consider all of the Trust documentation, including any information regarding any distributions made from the If a settlor has provided a Letter of Wishes (LOW) to the original Trustee, he or she may decide to forward this to the new Trustee or, in the alternative, a change of Trustee may be an opportune time for a settlor to reconsider and update the contents of a LOW.
The new Trustee will also review copies of the Trust’s current financial statements and its historical accounting records to date.
If the Trust is also changing to a new jurisdiction, the new Trustee might also prepare a Deed to change the law of the Trust to the new jurisdiction.
2. Winding Up The Old Trust
The second way to transfer the assets of a Trust to a new one is to wind up the old Trust and transfer the assets to a new Trust.
If the assets are held as shares in underlying companies, this may simply be a matter of transfering the shareholding to a new Trust. However, the Trustee of any Trust has an obligation to treat all beneficiaries fairly. Therefore, if the beneficiaries of the new Trust are not exactly the same as the old, the outgoing Trustee must consider distributions or other provision for the beneficiaries who will no longer benefit. Failure to do so could subject the outgoing Trustee to an action for breach of trust.
Finally, before winding up a Trust, the Trustee must have paid or provided for all outstanding liabilities. The Trustee will then draw up final trust accounts and proceed with the transfer of the trust assets.