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Inheritance of Trustee with no beneficial interest.

Inheritance of Trustee with no beneficial interest.

Postby Hairyloon » Mon Dec 11, 2017 8:52 am

Two people own a property together. They split up and agree that the beneficial interest of the property of the one party be one of them.transferred to the other party: they still hold a joint trust, but one has no beneficial interest.
The one with the beneficial interest dies, leaving the sole surviving trustee with no beneficial interest.

Clearly if the property was sold, then that trust would be transferred to the new owner, but what happens to the trust if the trustee dies before that sale happens?
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Re: Inheritance of Trustee with no beneficial interest.

Postby atticus » Mon Dec 11, 2017 10:53 am

The trustee should arrange the appointment of replacement trustees. That is a part of the responsibility she has taken on as a trustee.
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Re: Inheritance of Trustee with no beneficial interest.

Postby theycantdothat » Mon Dec 11, 2017 11:18 am

Although often thought of as an entity like a company or firm, a trust is an obligation owed by the trustees to the beneficiaries. Subject to what I say below, on a sale of land held on trust the obligation transfers to the proceeds of sale and the land is free from the trust.

If A and B hold land on trust for B and B dies, A holds the land on trust for B beneficiaries. If A sells the land an additional trustee must be appointed to receive the proceeds of sale so that the purchaser takes free of the trust.

If A and B hold land on trust for B and B dies and then A dies, as a matter of law the legal estate vests in A's personal representatives without any need for registration. In the absence of any provision to the contrary giving a power of appointment to someone else, A's personal representatives can appoint new trustees, including themselves. Once new trustees are appointed, subject to the appointment being perfected by registration, the legal estate vests in them. (For the record, if the personal representatives appoint themselves there is of course no transfer of the legal estate, but registration of the appointment is still needed so that they hold as trustees and not as personal representatives of A - the land is not part of A's estate.)
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Re: Inheritance of Trustee with no beneficial interest.

Postby Hairyloon » Mon Dec 11, 2017 12:52 pm

atticus wrote:The trustee should arrange the appointment of replacement trustees. That is a part of the responsibility she has taken on as a trustee.


That is much as I thought, though I would have said to appoint additional trustees; I think either works.
However what happens if that failed to happen for some reason?

TCTD appears to say that responsibility falls on the trustee's executers to appoint a trustee. Is it that simple?
I can't actually see any other way to work it, unless the trust can go to those with the beneficial interest: that would be an even simpler solution unless the purpose of the trust was because the beneficiaries could not be trusted.
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Re: Inheritance of Trustee with no beneficial interest.

Postby atticus » Mon Dec 11, 2017 1:05 pm

Hairyloon wrote:However what happens if that failed to happen for some reason?
A mess.
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Re: Inheritance of Trustee with no beneficial interest.

Postby Hairyloon » Mon Dec 11, 2017 3:21 pm

But not the trustee's mess to deal with... Potentially a nasty vengeance if they had fallen out with the beneficiaries.
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Re: Inheritance of Trustee with no beneficial interest.

Postby theycantdothat » Tue Dec 12, 2017 12:19 am

Hairyloon wrote:TCTD appears to say that responsibility falls on the trustee's executers to appoint a trustee. Is it that simple?


Not exactly. A legal power does not imply an obligation to use the power. Except as mentioned below, there is no obligation on the person(s) with power to appoint new trustees even if there are no trustees. However, if an appointment is needed where there is no one able or willing to make it, an application may be made to the court.

In the case of land, whilst when the number of trustees is reduced to one there is no need for a new trustee until there is a sale, when starting out you must have at least two and if the number is reduced to zero you cannot appoint just one.

Hairyloon wrote:I can't actually see any other way to work it, unless the trust can go to those with the beneficial interest: that would be an even simpler solution unless the purpose of the trust was because the beneficiaries could not be trusted.


Where beneficaries of full age are absolutely entitled to property they can call on the trustees to convey it to them, although if there are more than four beneficiaries, the legal estate can only be vested in four of them. Where no one is designated to appoint new trustees, the beneficiaries of full age taken together are entitled to the property absolutely they can call on trustees to resign or appoint new trustees.
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Re: Inheritance of Trustee with no beneficial interest.

Postby Hairyloon » Tue Dec 12, 2017 9:33 am

Thank you all. It seems that the trustee needs to be persuaded to appoint additional trustees. Is that straightforward? (The appointing, not the persuading).
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Re: Inheritance of Trustee with no beneficial interest.

Postby dls » Tue Dec 12, 2017 2:49 pm

This has in teh past been a fairly common problem.
Trusts of Land and Appointment of TrusteesAct 1996 set out to remedy.
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Re: Inheritance of Trustee with no beneficial interest.

Postby theycantdothat » Wed Dec 13, 2017 10:56 am

Hairyloon wrote:Thank you all. It seems that the trustee needs to be persuaded to appoint additional trustees. Is that straightforward? (The appointing, not the persuading).


For a conveyancer, yes, so long as someone has not complicated or messed things up.
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