In late 2018, for the first time, we saw some bank lawyers start requesting the removal of the clause that ensures the automatic disqualification of a trustee on bankruptcy be removed.
In a sentence, we are yet to see a coherent reason for banks needing the change – however commercially accept that the golden rule likely applies (that is, unless the request is complied with the financier will withhold funding).
Unfortunately, removing the clause makes the trust less effective on a number of levels, particularly in areas such asset protection and succession planning.
Candidly, the request is one that appears to be made by lawyers who do not specialise in trusts, and therefore do not necessarily appreciate the rules in this area.
The conclusion that this may be the case has been reinforced in requests View has seen where the bank lawyers asking for the trustee related clause to be deleted manage to identify the wrong clause.
In particular, the bank lawyer provides advice that the automatic trustee disqualification provisions are offensive. However they then list the clause that automatically disqualifies the principal or appointor role as the one that must be removed – a clause that the bank lawyer’s accept (once the error is pointed out) is irrelevant to the bank and can remain in the deed.