There are procedures for removing or changing a trustee if you are the creator, a co-trustee, or a beneficiary of a family trust and believe the trustee is misbehaving. There may come a moment when you feel that a trustee needs to be removed, regardless of whether you established a family trust, are its trustee, or beneficiary. Then, how can a beneficiary remove a trustee?
A family trust is a complex fiduciary arrangement that may lead to disagreements between trustees and beneficiaries even if it can help avoid probate, provide tax benefits, and even help with long-term care planning.
A legal document known as a trust agreement, which typically names one first trustee or two or more initial co-trustees, establishes a family trust. If the original trustees are connoting, such as in the event of resignation, death, or dismissal, the document also names one or more successor trustees. State law and the rules of the trust agreement both apply to the removal and replacement of a trustee.
Abolition by the Trustor to remove a trustee
The conditions under which the trustor may fire a trustee should be specified in the trust agreement. A trustee, including a replacement trustee, may typically be removed by the Trustor under the terms of the trust. The trustee need not justify the removal to do this at any time. The Trustor amends the trust agreement to accomplish this.
The Trustor cannot become a trustee in an irrevocable trust, unlike in a revocable trust. The most common reason for creating an irrevocable trust is to enable the Trustor to qualify for Medicaid long-term care coverage. The Trustor must forfeit both the ability to revoke the confidence and the ability to act as a trustee to do this.
Removal by Co-Trustee or Beneficiaries
Trust agreements typically provide trustees with guidelines regarding how the assets should be managed and the grounds and steps for removing a trustee, even if trustees have some freedom in managing trust assets. State law additionally specifies the obligations of a trustee, including the trustee’s fiduciary duty, which is the responsibility to uphold the conditions of the trust agreement and operate honestly and in the beneficiaries’ best interests.
A beneficiary trustee will remove legally for any of the following reasons:
- Breaking the terms of the trust agreement;
- Carelessly or purposefully mismanaging trust funds.
- Theft or fraud involving trust funds
- They are self-dealing or a conflict of interest, such as when a trustee purchases trust property for their use and pay less than fair market value.
- Demanding exorbitant fees
- An inability to get along with the beneficiaries or the other trustees
- The trustee’s mental incompetence
- The trustee’s financial insolvency, such as when they have declared bankruptcy
Removal by Trustee
One or more co-trustees may try to have the other one removed if there is a major disagreement between them. The trustees should inform the issue and request that the other trustee steps down if the Trustor is still alive. The trustees should inform the beneficiaries of the issue if the Trustor has deceased or is incompetent and ask them to join them in the removal process.
If any beneficiary is a minor or not expressly named. Such as when beneficiaries have been listed as the children of a certain person. Rather than as identifiable individuals, the situation becomes more problematic. Contrary to the wishes of the Trustor or the beneficiaries, it is improbable that a court would dismiss a trustee. The trustees who want to remove may also submit a petition.
Removal by Beneficiaries
Beneficiaries frequently have the option to oust or replace trustees under trust agreements. Typically, a majority of the beneficiaries’ votes are necessary. According to the trust agreement, a trustee may frequently remove for a good reason. Beneficiaries who want a trustee removed could also need to submit a petition for removal.
Petitioning Court for Removal
A co-trustee or a beneficiary may submit a petition to have a trustee removed from office. If trustees are named as beneficiaries, then the process will become more difficult. The petition may also ask the trustee for monetary compensation.
To convince the court that the trustee broke the provisions of the trust agreement then, sufficient proof must be shown. The procedure to remove a trustee by the court is difficult. This involves depositions, issuing subpoenas for documents, and petitioning the court to require the trustee to give an accounting. A trustee may utilize trust assets to fight against removal, which may help the accountants and other financial specialists. A qualified lawyer should be consulted when removing a trustee and creating a trust to reduce the likelihood of disagreement.