Can Trustees delegate their powers to someone else?

If you are a trustee, whether the trust is charitable, trading or a typical family trust, you should be aware of the powers and obligations you have.

Many trusts hold significant assets and, for their trustees, require time and effort in making decisions. Where that is the case, not surprisingly, we are quite often asked by a trustee if they can pass on their trusteeship to someone else, where it might be perhaps temporarily difficult or
inconvenient for them to carry out their obligations.

Courts, over hundreds of years, and legislation in support of trust law, have reinforced the basic principle that the role of a trustee is personal to the particular individual and cannot just be passed on or delegated. In this article we address one of the key exceptions to this principle and the
requirements and restrictions under which it can legally apply.

Under the Trusts Act 2019 (section 70), a trustee may delegate any or all of their powers and functions under the trust to a qualified person by power of attorney. The delegation must be effected by a formal deed signed by both the trustee and the delegate, and independently
witnessed.

The section prescribes that the power to delegate may only be exercised where necessary because of the occurrence of one of the following circumstances:

The trustee is;

  • absent from New Zealand; or
  • temporarily unable to be contacted; or
  • temporarily physically incapacitated; or
  • temporarily does not have capacity to perform the functions of a trustee.

Section 70 goes on to reinforce the temporary nature of the delegation – so this is limited to the shorter of either;

  • the duration of the above circumstances; and
  • 12 months.

The delegation can be extended if the circumstances continue beyond that time, but this again must be actioned formally.

A trustee may delegate their powers to a sole co-trustee but only where that sole co-trustee is a body corporate (including a trustee corporation) that is authorised under the Trusts Act 2019 to act as executor or administrator of a deceased person’s estate. This means a trustee could not delegate their powers to a person who is a sole co-trustee.

These limits reflect the fact that trustees cannot delegate their duties or powers, except where absolutely necessary in the circumstances. A power of attorney can be used to delegate or hand over the duties of the trustee to another person, but this power may only be used in very particular circumstances, and for a limited period.

Conclusion.
Trustees have very limited ability to delegate their duties or powers, including the temporary circumstances outlined in section 70 of the Trusts Act.

If as a trustee you wish to delegate your powers and responsibilities, or if you want to resign as a trustee, we recommend you consult with us to ensure these actions are properly carried out, and your interests are protected.

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