3rd July 2024
Mental incapacity and being a trustee
The assumption is often made that if someone has a Lasting Power of Attorney (LPA) in place, that the appointed trustees will have the authority to deal with matters in the event of mental incapacity of a trustee. This is not true and can cause problems.
In the case of an appointed trustee loosing physical capability but maintaining mental capability – an ordinary power of attorney can assist. However, an ordinary power of attorney will not help if the trustee loses mental capacity. A preference for many will be when the other trustees are aware of this issue and take necessary steps to ensure the trustee who no longer has mental capacity, retires from their role by having a deed of retirement drafted and signed. An issue arises when the other trustees are not in the know that one of the trustees is losing mental capacity.
But what happens when one trustee loses mental capacity and can longer fulfil their role as trustee? The escape route of appointing a new trustee is not available.
Section 36 of the Trustee Act 1925 allows a trustee to be replaced without a court of protection order if a trustee of that trust has no interest in the possession therein (“IIP”).
However, if it is an IIP for themselves, or themselves and the mentally capable spouse (or other appointed person), Section 36 of the Trustee Act 1925 offers no escape route again.
For persons in the circumstances as above, where Section 36 does not offer an escape, there are three options:
- Hope that the mentally incapability is not permanent, and that the trustee regains mental capability to objectively understand the legal requirements and can execute a deed of retirement.
- Do nothing. This risks the trustees not being able to act until after the death or recovery of the current mentally incapacitated trustee. This is not often the appropriate course of action but may be for some.
- Apply to the Court of Protection for an order to replace the mentally incapacitated trustee. Whilst this can be way of an application for an interim order, that may still take significant time to go through the Court system. Often, this will be the only viable option, if it is, the sooner the application is made the better.
For bespoke assistance in this area, please contact Edward Walter.
Edward Walter
Partner
Solicitor
Private Client
Office : Hello world!
01892 502 320ewalter@bussmurton.co.uk
Profile
Edward is a Partner in the Private Client Department. He started practising Private Client Law in 2000, initially as a solicitor in a well-known firm in Tonbridge and thereafter with several well-known East Sussex firms before joining Buss Murton in July 2014. Edward became a Partner in 2015.
He advises and acts on all aspects of Inheritance tax planning and Capital Gains tax planning. He also acts in Probate administration matters and post death Variations for Inheritance tax and Capital Gains tax purposes. He also regularly advises clients regarding the making of their Wills, Powers of Attorney, Lasting Powers of Attorney, Declarations of Trust with respect to client’s properties.
He undertakes the full range of advice and work with respect to Trusts and advises on associated tax implications of those actions. He also advises generally on (tax) domicile and residence issues.
He regularly advises and acts on the registration of Lasting and Enduring Powers of Attorney, the making of Statutory Wills and gift applications at the Court of Protection.
Expertise
Inheritance Tax Planning
Capital Gains Tax Planning
Wills
Probate and estate administration
Lasting Powers of Attorney
Declarations of Trust
Court of Protection
Estate Planning
Taxation advice
Succession strategies
Residence and domicile matters
Trusts
Alternative Contact:
Emily Luker
01892 502 346
eluker@bussmurton.co.uk
Beth Ahsunollah
01892 502 348
bahsunollah@bussmurton.co.uk
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