Beneficiaries of trusts sometimes need to realize how much control they actually have over a trust. That is because they are unaware of a power sometimes found in trusts that gives the beneficiary the ability to remove and replace a trustee.
Trustees are the legal owners of the trust. As such, they control the management of the trust assets and the distributions a beneficiary receives. The trustee cannot use the trust assets for their benefit, but they have to act honestly and in good faith for the benefit of the beneficiaries and abide by the trust terms.
If a trust is silent on a topic or the language is unclear, trustees can go to court to ask for a judge’s instructions as to what actions to take. Likewise, beneficiaries also have the ability to go to court to remove a trustee if they believe a trustee is not doing what they are supposed to or has breached their duty to the beneficiary.
If you are a beneficiary, here are five points you should know about removing and replacing a trustee:
- If you created the trust and it is revocable (meaning you can change it), you can simply amend the trust and remove the trustee. Revocable trusts are in your control. You can appoint a trustee to serve with you, remove and replace an existing trustee, or name a successor trustee to serve in the event of your death or incapacity.
- If you are the beneficiary of a trust someone else created for your benefit, you may still have the power to remove and replace a trustee. The person who created the trust may have given you this power when the trust was written. Sometimes, there are caveats to what you can do. For instance, you may be able to remove an existing trustee, but you have to replace that person with a professional trustee or a bank or trust company. In other words, you cannot remove the trustee and replace them with your college roommate.
- If there are multiple beneficiaries of a trust, you may need everyone’s agreement in order to change the trustee. This is a bit trickier and would require you to be aligned with the other beneficiaries – or a majority of them.
- Even if the trust does not give you the power to remove a trustee, some states will allow you to remove a trustee if all the beneficiaries agree. The removal of the trustee is not inconsistent with why the trust was created, and a suitable successor trustee has been named. This would require a court action. However, if a trustee knows that the beneficiaries want him to remove him, he may prefer to resign quietly rather than face a public removal in court.
- If a trustee contests a removal, you will need a reason to remove them, and it could result in a lengthy and costly court process. For many people, it is worth the time and expense of a court battle to get rid of a trustee they do not like. For others, they do not want to deal with the headache and costs associated with a removal in court. They may also be disheartened to learn that the trustee can use trust monies to defend himself. That means you are essentially paying your own legal fees and the trustee’s legal fees. Some causes for removal include, comingling trust monies, not providing accountings, and distributing monies to the wrong beneficiaries. However, if the trustee is removed, the court may make them pay their own attorney’s fees.
Hether Cahill, an attorney who litigates trust disputes, gives this advice to clients contemplating a trustee removal, “Be sure to seriously consider the terms of the trust instrument and the actions by the trustee, as sometimes beneficiaries do not realize the rights and power they have or the information they are entitled to receive. Often communicating with their trustee can resolve administration issues, either with answers to beneficiaries’ questions or with a voluntary resignation.”
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