As the beneficiary of a trust, you are dependent on the Trustee of the trust to manage the trust assets well and to administer the trust according to the terms created by the Settlor of the trust. What happens if you feel the Trustee is not doing his/her job properly? As a beneficiary, do you have the ability to get the Trustee replaced? The Nashua trust administration attorneys at DeBruyckere Law Offices explain the power of a beneficiary if a problem arises with the Trustee.
How Does a Trust Work?
Before answering the question “Can a beneficiary remove a Trustee?” it helps to have a firm understanding of how a trust works and of the relationship between the parties to a trust. A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries as well as invests trust assets and administers the trust terms according to the terms created by the Settlor. Trusts all fall into one of two categories – testamentary or living trusts. A testamentary trust is activated by a provision in the Settlor’s Will at the time of death whereas a living trust activates once all formalities of creation are in place and the trust is funded.
The Settlor of a trust creates the terms by which the trust is administered. As such, a Settlor has wide latitude to determine both how the trust operates and the authority given to the beneficiaries of the trust. As long as a term is not illegal, impossible, or unconscionable, a court will likely uphold the term. That means that a Settlor has the ability to give the beneficiaries of the trust as much authority, or as little authority, over the Trustee as the Settlor chooses. Some Settlors, for example, specifically delegate the authority to remove a Trustee to the beneficiaries. On the other hand, a Settlor might make it clear that the beneficiaries do not have the right to remove a Trustee – or the trust terms could be silent on the issue. Regardless of what the trust terms say, or do not say, the beneficiaries of a trust always have certain rights, including:
- Right to distributions – if you are a current beneficiary, you have a right to receive any distributions due to you under the terms of the trust agreement.
- Right to communication/information – you have the right to be kept informed about trust business and to be able to communicate with the Trustee of the trust.
- Right to an accounting – you have the right to receive a full accounting showing things such as what assets the trust holds, how much interest has been earned by the trust, and what expenses have been paid by the trust.
- Right to petition a court to remove a Trustee or terminate a trust – even if the Settlor did not grant you the authority to remove a Trustee directly, you always have the right to petition a court for the Trustee’s removal. To successfully petition a court, however, you will need to convince the court that removing the Trustee is in the best interest of the trust and of all the beneficiaries. Reasons why a court might approve a petition to remove Trustee include alleging, and proving, that the Trustee:
- Mismanaged trust assets
- Engaged in self-dealing
- Failed to follow the trust terms
- Created a conflict of interest
- “Good cause” (this is the “catch-all” for reasons that do not fit neatly into any of the common categories)
Contact Nashua Trust Administration Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns, contact the Nashua trust administration attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
Living trusts can be further divided into revocable and irrevocable living trusts. Because a testamentary trust is activated by a provision in the Settlor’s Will, and a Will can always be revoked up to the time of the Testator’s death, a testamentary trust is also revocable up to that point.
If the Settlor designated a successor Trustee that person will take over the administration of the trust. If not, a judge will appoint someone.
Legally, a beneficiary can sometimes also be the Trustee; however, there are may be reasons why you would not want to be both a beneficiary and the Trustee.
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