Legal Tip 386: Death of One Joint Tenant Trustee

2 Trustees can legally own trust assets in their capacity as trustee as either Joint Tenants or as Tenants in Common.

If 2 (or more) trustees hold an asset as Joint Tenants and one dies what happens?

Under the survivorship provisions when one joint tenant dies their ‘share’ of the asset disappears and the surviving owners ‘shares’ increase.

This is how it works with trustees as well.


Example

Homer and Marge are the trustees of the Simpson Family Discretionary Trust. They registered their ownership as Joint Tenants.

When one joint tenant dies the ownership reverts to the survivor, so when Marge dies Homer will become the sole legal owner.

But the trust deed may specify something else happens on the death of the trustee. The deed could stipulate that when one joint tenant dies the new trustee will be Homer and Bart for example.

What if Marge died? In this case the legal owner of the asset would be Homer. But he would be bare trustee for himself and Bart who, in turn, are trustees of the discretionary trust for the benefit of the collective beneficiaries of the trust.

Homer might then have to transfer title of the property to himself and Bart.

If the deed was silent then Homer would continue on as the sole trustee until replaced by the appointor perhaps.



Under NSW law this is covered by s 57 of the Trustee Act 1925

TRUSTEE ACT 1925 - SECT 57 Two or more trustees

 

In the case of 'tenants in common' for the trustees of a trust, if Marge were to pass away and Homer remain alive, the new trustee for Marge would depend on what's in her will, just like with any property she owns personally, correct? So if Marge had in her will that all property would go to Ned (as she was secretly having an affair with him), then Ned would become trustee in conjunction with Homer. But the Appointer (Homer in this case) could fire Ned if he didn't want Ned to stay on as trustee.

 

Yes that would be the case I think