Can a trustee be removed from a trust?
Trusts are one of the most critical and versatile estate planning tools. Not only do trusts enable individuals to pass on their property and financial accounts without having to go through probate, but they also can provide enhanced disability planning during their lifetime, protect assets for future beneficiaries, and minimize taxes. Although trusts have numerous advantages,, the Trustee—the person appointed to manage and distribute the trust’s assets — must be careful not to violate the terms of the trust document while administering the trust or he or she could be subject to removal. The question then becomes how can a trustee be removed from a trust? In order to answer that question, we must first understand what a trustee is.
What is the Function of a Trustee?
A trustee is accountable for the disposition of trust assets. This includes supervising the day-to-day management of trust property. As the person whose assets are funding the trust, the grantor – also known as the trustor–, has the option of appointing anyone as trustee. In most cases, a trustee is appointed after your death and is charged with several significant responsibilities. These responsibilities include administering your estate and distributing assets to beneficiaries, making certain tax decisions, paying the estate’s debts and expenses, ensuring that all life insurance and retirement plan benefits are received, and filing and paying any federal and local taxes that may be due.
The Authority to Remove a Trustee
Generally, the documents that establish a trust will address who has the authority to remove a trustee. If the documents are prepared by a diligent attorney, they will also discuss the procedure for removing a trustee. Even if the trust document is silent as to how a trustee may be removed, the following individuals have the authority to remove the trustee upon petition to the court for cause:
- Beneficiaries of trusts
- The court of probate
- The trust’s grantor Co-trustees
- Additionally, a trustee may resign voluntarily.
Justifications for Removal
Trustees are required to adhere to both state law and the provisions of the trust document. Additionally, they must perform certain general duties, such as prudently managing trust assets and being loyal to the beneficiaries and the trust itself. When a trustee fails to carry out their duties or carries them out incorrectly, they may be removed from office. The following are some of the more frequent reasons why a trustee may be removed from a trust.
- Self-dealing or stealing property entrusted to you
- Infractions of the trust’s terms
- Between the trustee and the beneficiaries, there is hostility.
- Intentional or negligent mismanagement of trust assets
- Excessive fees
- Incapacity or bankruptcy
- Failure to account for or report to beneficiaries as required or requested
If you have the authority to remove a trustee, you should first contact them to discuss your concerns and give them an opportunity to comply with the trust’s terms before removing them. However, if nothing changes following this conversation, it may be prudent to terminate the trustee’s appointment.
How to Terminate a Trustee
Generally, if you wish to remove a trustee from a trust, you should consult the trust documents to determine how to proceed. However, if the trust documents do not address how a trustee may be removed, you must petition the probate court to do so.
Additionally, one may sue the trustee for any damages caused to the estate by the trustee’s mismanagement of the trust. For instance, if a trustee wastes trust funds on unnecessary purchases, the trust’s beneficiaries are likely to be able to recover this money.
Removal by the Trust’s Grantor
Generally, a trustor has the authority to remove both the trustee and the successor trustee. Additionally, the trustor may remove a trustee at any time without providing a reason for the removal. A trustee may carry out this action by amending the trust documents.
A serious conflict between trustees could prompt one to attempt to oust the other. If the trustor is still alive, the trustees should consult with him or her before seeking court assistance—so they can amend the trust documents. If the trustor is deceased, however, the trustees should seek approval to remove the other trustee from the trust’s beneficiaries. Additionally, if no beneficiaries are specifically named, it will be difficult for one trustee to remove another without petitioning the probate court.
The majority of trust documents include a provision allowing a trust beneficiary to remove or replace a trustee. When a trust has multiple beneficiaries, a majority vote of the beneficiaries is frequently required. However, beneficiaries typically have the ability to remove a trustee only if the trustee has committed an act that necessitates their removal. If no cause exists, the beneficiaries may petition the probate court for removal.
Petition for Removal from the Probate Court
Co-trustees or beneficiaries may petition the probate court to have a trustee removed. While this is already a complicated process, it can become even more complicated if one of the trust’s beneficiaries is also a trustee. Additionally, the petition may seek monetary damages from the trustee.
To establish a strong case, the plaintiff must present convincing evidence that the trustee violated the terms of the trust agreement or breached their fiduciary duties. If the probate court receives sufficient evidence that the trustee should be removed, the court will conduct depositions, issue subpoenas for records, and subpoena the trustee for accounting records. Additionally, this process may necessitate the involvement of accountants, other financial experts, and attorneys. Finally, it is critical to keep in mind that the trustee may use trust assets to fight removal.
How the Law Offices of Clifford M. Cohen Can Help
Estate planning is a process that every Maryland resident should pursue. Unfortunately, however, many people see estate planning as unnecessary and put it off until critically ill or nearing death. Although creating a plan, even during a crisis, is better than no plan at all, waiting until a tragedy strikes is never wise and is almost always less effective than beginning early. Not only is earlier planning less stressful, but it’s also likely to be more comprehensive as it plans for lifetime occurrences as well as after death. So act now and contact a seasoned estate planning attorney, and rest assured knowing that you and your family are prepared for whatever life-changing event may occur.
At the Law Offices of Clifford M. Cohen we design customized estate plans, unique to each of our clients. There is no set template and one size does not fit all. If you are unsure of what all should be in your estate plan, we can provide guidance through in-depth one-on-one conversations. Simply express your concerns, and we can make you aware of the documentation needed to ensure that it does not become an issue, but our involvement doesn’t stop there. We are fully invested in your future and will serve as your counsel throughout the estate planning process and beyond. Contact us today to learn more about how we can help in your estate planning.