What Happens if a Trustee Loses Mental Capacity?

When a trustee loses mental capacity, it can create significant legal and practical challenges for managing a trust. Understanding your options is essential to ensure the trust continues to operate smoothly and lawfully.

A trustee is responsible for managing and making decisions about trust assets on behalf of beneficiaries. Since a trust cannot legally own property, legal title to the trust assets is held by the trustees, they must give consent for transactions, follow the terms of the Trust Deed, and act unanimously unless the deed states otherwise.

If even one trustee loses mental capacity, the remaining trustees may be unable to act, potentially blocking access to trust assets. Below are the key steps to take if a trustee becomes incapable of performing their duties.

So what should you do if a trustee loses mental capacity?

1. Review the Trust Deed

Which may include provisions for:

• Appointing or removing trustees
  Many deeds give the settlor (person who created the trust) or co‑trustees the authority to remove an incapacitated trustee through a deed of retirement.
• Delegation of trustee powers
  Some deeds allow trustees to delegate decision‑making through a Lasting or Enduring Power of Attorney. If permitted, check whether the incapacitated trustee had a valid LPA in place.
• Automatic removal on loss of capacity
  More common in foreign trusts, some deeds automatically remove a trustee once incapacity is medically confirmed.

If these provisions exist, they may allow the trust to continue functioning without court involvement.

2. Rely on the Trustee Act

If the Trust Deed does not contain express powers of removal, the Trustee Act provides statutory mechanisms for replacing a trustee who lacks capacity.

Key points include:

• Co‑trustees can remove and replace an incapable trustee.
• The Act typically allows replacement rather than reducing the number of trustees.
• Statutory powers must always comply with the terms of the Trust Deed.
• If no trustees remain, the executors of the last surviving trustee may appoint new trustees.

3. Beneficiaries May Be Able to Remove a Trustee

In limited circumstances, beneficiaries can collectively remove or appoint trustees. This is only possible if:

• All beneficiaries are adults with mental capacity.
• They are all absolutely entitled to the trust assets.

This is rarely possible for discretionary trusts, where the class of beneficiaries may include ‘issue’ which is a term for all lineal descendants , like an unborn child which could impossible to confirm who could be entitled to the trust.

4. Apply to the Court of Protection

If no other route is available, an application to the Court of Protection may be required.

This may be necessary when:

• No statutory powers apply.
• The person with authority to appoint/remove trustees has themselves lost capacity.

The Court of Protection can make decisions on behalf of someone who lacks capacity, including exercising their trustee powers. Applications must clearly explain:

• The decision required
• Why only the incapacitated trustee has authority
• The preferred outcome

The Court may or may not agree, so this is usually considered a last resort.

What Should You Do Next?

If a trustee loses mental capacity, the correct approach depends on the Trust Deed, the structure of the trust, and the legal powers available. This is a complex area of trust law, and professional advice is strongly recommended.

At Blanchards Family Law, our Trust specialist Ashley Minott, a full STEP member with over a decade of trust administration experience, can guide you through your options, including applications to the Court of Protection where necessary.

To discuss your situation, contact us on 0333 344 6302 to arrange an initial meeting.