Appointing & Removing Trustees in NZ Trusts

Trustees are responsible for managing trust assets — so choosing the right people is essential. NZ law requires trustees to act prudently and follow the Trusts Act 2019.

Updating trustees is common and necessary to maintain effective trust governance.

When Trustee Changes Are Needed

Relationship Changes

Marriage or new partnership
Separation or divorce
End of de facto relationship
Family disputes
Breakdown of trust among trustees

Retirement

Aging trustees wanting to step down
Time commitment too great
Health issues
Moving overseas
Loss of interest

Death

Trustee passes away
Successor trustee needed
Continuation of trust
Avoiding deadlock

Loss of Capacity

Mental incapacity
Physical disability
Dementia or cognitive decline
Inability to fulfil duties
Under legal disability

Disagreements

Trustees cannot agree
Breach of duties
Conflict of interest
Poor performance
Mismanagement concerns

Strategic Reasons

Adding expertise (legal, financial)
Bringing in independent trustee
Establishing corporate trustee
Succession planning
Improving governance

How to Appoint a New Trustee

Step 1: Review the Trust Deed

Check appointment provisions:

Who has power to appoint
Process required
Restrictions on appointments
Maximum/minimum number of trustees
Qualification requirements

Common appointment powers:

Existing trustees can appoint
Settlor appoints (if alive)
Appointor or protector appoints
Beneficiaries appoint (rare)
Court appoints (if necessary)

Step 2: Confirm Authority to Appoint

Verify who can act:

Existing trustees
Specific named person (appointor)
Settlor
Court order required

Document decision:

Trustee meeting
Resolution to appoint
Reasons for appointment
New trustee’s details

Step 3: Choose Suitable Trustee

Consider:

Competence – Understands trustee duties
Availability – Has time to commit
Independence – No conflicts of interest
Trustworthiness – Reliable and honest
Skills – Relevant expertise
Relationship – Gets along with other trustees

Options:

Family members
Professional trustees (lawyers, accountants)
Corporate trustees (companies)
Independent trustees
Specialist trustees (for specific assets)

New trustee must:

Understand trustee duties
Accept the role
Sign deed of appointment
Acknowledge obligations under Trusts Act 2019

Information to provide:

Trust deed
Recent financial statements
Asset list
Beneficiary details
Trust history
Current issues

Step 5: Draft Deed of Appointment

Legal document recording:

Date of appointment
Name of new trustee
Authority for appointment
Effective date
Powers and duties
Signatures of existing trustees

Usually prepared by lawyer to ensure validity.

Step 6: Execute Deed of Appointment

Formal signing:

All existing trustees sign
New trustee signs (accepting)
Witnessed appropriately
Dated clearly

Step 7: Update Trust Records

Administrative updates:

Update trustee register
Amend asset records
Update bank accounts
Notify IRD
Update insurance
Record in trust minutes

Step 8: Register Changes Where Required

Property:

Update land titles (if trust owns property)
Land Information NZ notification
Bank notification

Banks and Institutions:

Update bank account signatories
Notify investment managers
Update insurance policies
Notify advisers

How to Remove a Trustee

Grounds for Removal

Voluntary:

Resignation
Retirement
Mutual agreement

Involuntary:

Death
Mental incapacity
Bankruptcy
Breach of duties
Conflict of interest
Poor performance
Court order

Methods of Removal

1. Resignation

Trustee-initiated:

Written notice to other trustees
Effective date specified
Hand over all trust property and records
Sign deed of retirement
Cooperate with transition

Requirements:

Cannot abandon duties suddenly
Reasonable notice period
Ensure minimum trustees remain
Proper handover

2. Power Under Trust Deed

Deed may allow:

Trustees to remove other trustees
Settlor to remove trustees
Appointor to remove trustees
Specific removal procedures

Process:

Follow deed requirements exactly
Document reasons (sometimes required)
Formal resolution
Deed of removal

3. Automatic Removal

Certain events trigger removal:

Death
Mental incapacity (under Protection of Personal and Property Rights Act)
Bankruptcy
Ceasing to meet trustee qualifications

Documentation:

Death certificate
Court order (for incapacity)
Bankruptcy notice
Update trust records

4. Court Order

When needed:

Trustee refuses to resign
Breach of duty
Unfit to act
Trustee disputes
No power in deed
Deadlock

Court can remove if:

Best interests of trust
Best interests of beneficiaries
Trustee unfit
Trustee’s conduct warrants removal

Removal Process

Step 1: Determine Authority and Grounds

Review:

Trust deed removal provisions
Grounds for removal
Who has power to remove
Process required

Step 2: Document Issues (If Involuntary)

Evidence of:

Breach of duties
Poor performance
Conflicts of interest
Beneficiary complaints
Financial mismanagement

Keep records of:

Communications
Decisions
Concerns raised
Attempts to resolve

Step 3: Attempt Resolution (If Appropriate)

Before formal removal:

Discuss concerns
Opportunity to improve
Mediation
Compromise solutions

Document all attempts to resolve issues.

Step 4: Formal Removal Resolution

Trustee meeting:

Resolution to remove
Grounds stated
Effective date
Transition plan

Signed by:

Trustees with removal power
Or person with authority under deed

Step 5: Notify Removed Trustee

Formal written notice:

Deed of removal
Effective date
Reasons (if required)
Request to return trust property
Request for records and documents

Step 6: Retrieve Trust Property and Records

Removed trustee must:

Return all trust documents
Transfer control of assets
Provide account of dealings
Hand over keys, passwords, etc.
Sign off on transactions

Step 7: Update All Records and Registrations

Same as for appointments:

Update trust records
Notify banks and institutions
Change property registrations
Update IRD
Inform beneficiaries (if appropriate)

Warning Signs a Trustee Should Be Replaced

Poor Decision-Making

Consistently poor judgment
Ignores advice
Acts against beneficiaries’ interests
Impulsive decisions
No strategic thinking

Failure to Engage

Doesn’t attend meetings
Unresponsive to communications
Doesn’t read documents
Shows no interest
Delegates everything

Conflict of Interest

Personal benefit from decisions
Competing interests
Family disputes affecting judgment
Business conflicts
Cannot be objective

Breakdown in Relationships

Cannot work with other trustees
Constant disputes
Refuses to cooperate
Creates hostile environment
Threatens other trustees

Non-Compliance with Trusts Act

Doesn’t keep records
Ignores mandatory duties
No trustee meetings
Poor financial management
Doesn’t respond to beneficiary requests

Other Red Flags

Mixing personal and trust finances
Using trust assets personally
Dishonesty
Substance abuse affecting duties
Financial difficulties affecting judgment

Corporate Trustees

What Is a Corporate Trustee?

A company appointed as trustee:

Limited liability for company
Professional management
Continuity
Independent decision-making

Advantages

Limited liability – Company liable, not directors personally
Continuity – Doesn’t die or lose capacity
Professional – Formal decision-making
Independence – Separation from family
Expertise – Can employ specialists

Disadvantages

Cost – Company compliance costs
Complexity – More administration
Less flexibility – Formal processes required
Control – Directors must act properly

When to Use

Business trusts
Trading trusts
High-risk situations
Professional asset protection
Large or complex estates

Best Practices for Trustee Changes

1. Plan Succession

Identify potential successor trustees
Gradual transition
Training and handover
Documented procedures

2. Maintain Minimum Numbers

Never go below minimum (typically 2)
Avoid single trustee situations
Plan for contingencies
Have backup trustees

3. Balance Experience and Fresh Perspective

Mix of experienced and new trustees
Different skills and expertise
Generational diversity
Independent thinking

4. Document Everything

All appointments and removals
Reasons for changes
Meeting minutes
Communications
Handovers

5. Communicate with Beneficiaries

Explain trustee changes
Introduce new trustees
Reassure continuity
Address concerns

FAQs — Trustee Changes

Can a trustee resign at any time?

Generally yes, but:

Must give reasonable notice
Cannot abandon trust suddenly
Must ensure proper handover
Minimum trustees must remain

Cannot resign to avoid liability for past breaches.

Do all trustees have to sign appointment documents?

Usually yes, unless trust deed allows:

Majority to act
Specific trustee to appoint alone
Appointor to act independently

Best practice: All trustees sign to avoid disputes.

Does removing a trustee require beneficiary approval?

Generally no, unless:

Trust deed requires it
Court orders it
Beneficiary is also appointor

But good practice to communicate with beneficiaries.

What if trustees disagree on appointments?

Resolution options:

Follow trust deed voting provisions
Mediation
Court application for directions
Compromise

If deed silent: Usually requires unanimity or majority (depending on deed).

Can a professional trustee be appointed?

Yes, and often recommended:

Lawyers
Accountants
Trust companies
Professional trustees

Benefits: Expertise, independence, continuity.

Costs: Professional fees ($2,000-$10,000+ per year).

How many trustees should a trust have?

Legal minimum: 1 (but risky)

Recommended: 2-4 trustees

2 trustees: Simple, but risk of deadlock
3 trustees: Good balance, odd number for voting
4+ trustees: More oversight but harder to coordinate

Can a beneficiary be a trustee?

Yes, and common in family trusts:

Must act in all beneficiaries’ interests
Cannot favour themselves
Must manage conflicts of interest
Higher scrutiny of decisions

What if a trustee becomes mentally incapacitated?