The power to appoint and remove trustees of a discretionary family trust

Published by Vanessa Crosby on November 16, 2010

The power to appoint and remove trustees is commonly retained by the person who forms the family trust – the Settlor. There are good reasons for having such power. It can be used to control the trustees exercise of their discretion. If they do not perform the Trust according to the Settlor’s wishes the Settlor can remove the trustees without giving reasons.

This does not mean however that the power can be exercised without constraint. The power must still be exercised in accordance with the purposes of the Trust. It is also limited by the duty to perform the Trust honestly and in good faith for the benefit of the beneficiaries. This duty is one of the fundamental concepts of a Trust and is enforceable by the beneficiaries.

This was demonstrated in Mudgway v Slack where after separation the Settlor appointed a new trustee and removed the children of his previous relationship as beneficiaries of the Trust. Pursuant to Section 51 of the Trustee Act the Court removed the new trustee and vested the power of appointment in the independent trustee. Careful thought therefore needs to be given to the appointment or removal of trustees by the settlor.

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