You may find that the trustee cannot amend the trust deed, distribute capital and, in some cases, income will go by default to unintended beneficiaries at higher than necessary tax rates.

Subject to the particular trust deed, the important positions of authority in family trusts are usually the trustee (who runs the trust and distributes income and capital), the Appointor (who has the power to hire and fire the trustee) and the Guardian (whose consent is usually required to distribute the capital of the trust, amend the trust deed and sometimes the Guardian’s consent is required to distribute income, otherwise it “defaults” to primary beneficiaries). Some deeds have a Principal instead of a Guardian and Appointor. Principals usually have the power to hire and fire the trustee and may exercise some powers commonly exercised by a Guardian.

Enduring Power of Attorney

Merely appointing an attorney under an Enduring Power of Attorney does not mean that the attorney would automatically act as Guardian, Appointor or Principal. Instead, the trust deed needs to provide for that because, whilst an Enduring Power of Attorney gives the attorney the power over the donor’s financial affairs, the positions of Guardian, Appointor and Principal are generally considered at law to be powers of appointment subject to discretion (similar to exercising the powers of a company director) and are not considered financial affairs (like operating a bank account).

Unless the trust deed already deals with the loss of capacity of such persons (and most older deeds do not) the usual solution is to amend the trust deed (or prepare other appropriate documents, depending on the wording of each trust deed) to state that on incapacity, the appointed attorney under an Enduring Power of Attorney acts in the capacity as Guardian, Appointor or Principal (as the case may be).

What should you do?

You should seek the advice of a qualified legal advisor and have your trust deed amended or other documentation prepared (as appropriate for the particular trust deed) to ensure that there is a successor Guardian and Appointor.