To change the Trustee of an International tax free Trust (Offshore Trust) a certain procedure needs to be followed.
To begin with the existing Trustee of the Offshore Trust must resign or be removed.
The resignation can be verbal or in writing (in writing is preferable) however the Trust Deed usually dictates the required method. If there is more than one Trustee, the notice, whether verbal or in writing, is given to the other Trustees. If there is only one Trustee then the notice is given to the Nominated Beneficiaries.
A Trustee can be removed by the Appointor/Settlor. Depending upon the wording of the Trust Deed, either the retiring Trustee appoints a new Trustee or the Appointor/Settlor appoints a new Trustee. The appointment should be in writing, preferably by Deed and should be signed by the new Trustee and incorporate an undertaking by the new Trustee to act as Trustee and discharge the duties of a Trustee set out in the Deed and at law.
Most Discretionary Trust Deeds provide that it is the Appointor/Settlor that has the power to remove an existing Trustee and appoint a new Trustee however:
- If there is no Appointor/Settlor then a Trustee (either the retiring Trustee or a continuing Trustee) has the power to appoint a new Trustee.
- If the Trustee has died then the deceased Trustee’s Executor (Legal Personal Representative) has the power to appoint.
- If the Trustee or Legal Personal Representative fail or refuse to appoint then the Nominated Beneficiaries can appoint.
It is important for Trustees to be mindful that if there is a change of Trustee then the Trust Deed must provide or be amended to provide (before the new appointment is made) that neither the retiring Trustee or the new Trustee can ever be beneficiaries of the Trust.
How is a new Trustee added?
Depending upon the wording of the Trust Deed, it is either the Trustee or the Appointor/Settlor who has the authority to add a new Trustee. The appointment can be verbal or in writing (in writing is preferable). Generally the appointment is in the form of a Deed. The new Trustee must, when accepting the appointment, undertake to carry out the duties of Trustee and discharge the obligations contained in the Trust Deed and at law.
Resignation: A Trustee may resign as Trustee of an Offshore Trust by giving the Appointor/Settlor(s), or Trustee(s) as relevant, notice. However, unless there is a remaining Trustee, the resignation is only effective when a new Trustee has been appointed;
Removal: If the Trust has an Appointor/Settlor(s), then, depending on the wording of the Trust Deed, the Appointor/Settlor(s) may remove a Trustee at any time by signing a statement to that effect.
Appointor/Settlor’s and Trustee’s powers: If the Trust has an Appointor/Settlor (and if the Trust Deed provides for it) then the Appointor/Settlor, or otherwise the Trustee, may appoint an additional or replacement Trustee at any time by a written statement to that effect.
First named Beneficiary’s powers: If the Trust has no Appointor and no Trustee, then (if the Trust Deed provides for it) the first named Beneficiary who is still alive may appoint an additional or replacement Trustee at any time by a written statement to that effect.
Automatic termination of Trustee’s appointment: Also, a Trustee’s appointment terminates automatically if any of the following occurs:
(a) the Trustee is found to be of unsound mind, or the Trustee or his or her estate becomes liable to be dealt with in any way under a law dealing with mental health;
(b) the Trustee becomes bankrupt or makes an arrangement or composition with his or her creditors; or
(c) the Trustee enters into compulsory or voluntary liquidation (except for the purposes of amalgamation or reconstruction), or has an administrator, receiver, official manager, or receiver and manager appointed to any part of its assets.
The documents that would have to generated to effect a change of Trustee usually include:
- Trustee consent forms;
- Appointor minutes (if applicable);
- Current Trustee minutes;
- New Trustee minutes;
- First Named Beneficiary minutes (if applicable);
- Draw and Settle a Deed of Amendment
Local laws can have an impact. Hence you should seek the advice of a Trust Law expert in the jurisdiction where the Trust is registered or domiciled before committing to try and change Trustee/s.