Are you considering how to remove a trustee who you feel is not doing their job or is incompatible? While you may feel there “should” be a straightforward response to your problem, often there is not. Depending on the trust, the removal – and the replacement – can have a broad range of effects on the trust. Changing trustees is inherently serious business and is supposed to be difficult and therefore must follow a strict procedure.

What to Consider When Removing a Trustee  

First and foremost, what does the trust instrument say about removing a trustee?

The Grantor’s Power: The document may provide that the trust grantor or possibly a trust protector can remove a trustee. If a grantor has this power, there’s rarely any checks and balances: the person who created the trust simply exercises their right to amend or to appoint and remove the trustee. If the trust is drafted well, this power is given only when it’s appropriate and consistent with tax and other considerations.

Trust Protector’s Power: If the grantor does not have the power, then a third party, like a trust protector may have this authority. This is usually a power to remove a trustee without cause. The only requirement is acting in good faith, which is a low bar for removing and replacing a trustee.

Beneficiaries’ Power: Beneficiaries or other interested parties very rarely are given authority to remove a trustee because of the blatant conflict of interest and the potential for negative tax consequences. Having such power over the position of trustee who controls investments, distributions, and accounting may be seen as tantamount to ownership of the trust, causing the trust to be taxed to the beneficiary or included in the beneficiary’s estate at death.

Generally, if beneficiaries seek to remove a trustee they have to do so for cause, and this results in litigation. Litigation often results in having to settle for another undesirable trustee appointed in a compromise and having to pay the old trustee on the way out.

No One Has the Power to Remove: There is no “right to remove” a trustee unless the trust instrument grants it. When the trust instrument is silent on how to remove a trustee, you probably have trouble on your hands. Resistance will take many forms.

Step Down, Please

The easiest thing is to ask the trustee to resign and work something out. A demand to step down can be met with a refusal, leading to litigation, leading to high fees and payment to the trustee for their final (usually unsatisfactory) services.

Defenses: Trustees who were appointed by the trust grantor, or by a previous trustee, may feel, rightly so, that they have a duty to do their job. They wish to stand up to who they perceive are pushy beneficiaries. They may also be defensive of being accused of falling down on the job. Trustees also enjoy getting paid in many cases for their work. Hopefully they’ve earned it, but if they haven’t, they’re all the more likely to be reluctant to withdraw.

Removal for Cause

Short of a resignation in a settlement with the trustee, the removal procedure under state law must be followed. Take a look at the statute, like Uniform Trust Code Section 706 (if applicable) or common law (based on cases). The burden imposed there is going to require presenting evidence that the trustee has committed a serious breach of trust (self-dealing, lack of loyalty, lack of good faith in dealing with beneficiaries or in affairs of the trust), or that the trustee evidences a lack of cooperation, unfitness, unwillingness, or persistent failure to administer the trust effectively. Even a substantial change in circumstances or unanimity of beneficiaries in asking for removal can be persuasive.

Get Help Navigating the Process of Removing a Trustee

Choosing to remove a trustee, whichever method you choose, is a stressful decision. Making serious legal decisions with potentially far-reaching consequences is a difficult place to be. Our team would love to help you navigate this decision making process. We’ll work with you to help determine your next best steps.

Ready to get in touch? Give our team a call at 774-277-9300.