Removal of mentally incapacitated trustees from property titles

As a result of s 104 of the Trusts Act 2019 if a trustee is mentally incapacitated they must be removed as trustee:

(1) A person with the power to remove trustees must act to remove a trustee if—

(a)a trustee loses the capacity to perform the functions of a trustee; and

(b) that trustee’s powers have not been delegated in a manner authorised by an enactment or by the terms of the trust.

In circumstances where a trust owns land, the High Court still has the power to make an order vesting title to the land in the remaining or new trustees where the trustee being removed is mentally incapacitated, including an application to remove the incapacitated trustee. That is however only necessary if the trust deed does not provide that a mentally incapacitated trustee ceases to be a trustee, or if there is no one with the power to remove trustees.

In a significant change under the Trusts Act 2019, if a trustee is removed and cannot sign an Authority and Instruction (A & I) form for a transfer instrument, for example, because they are incapable or refuse to do so, the new and continuing trustees will be able to do so on their behalf (s118(2)). A copy of the document removing the trustee and a declaration that it was validly executed will be sufficient proof of the right to sign on behalf of the removed trustee. These will need to be retained by the certifying practitioner with the signed A & I form (s 117(1)(c)) and must be provided to LINZ if the transaction is subject to an e-dealing compliance review:: Landwrap September 2020 Issue 160. https://www.linz.govt.nz/news/2020-09/landwrap-september-2020.