Family trusts can offer a lot of advantages, including tax advantages and benefits from long-term care planning. However, it is not uncommon for there to be disputes and conflicts between trustees and beneficiaries. When such disputes arise, there may be a time when you consider whether a trustee needs to be removed and you may be wondering what this entails.
Understanding the Terms
As a quick review of some essential terms, the person who creates a trust is called a trustor, grantor, or settlor. A family trust is created when the trustor and the beneficiaries of a trust are members of the same family. A trust agreement is the legal document that sets up a family trust, and the agreement typically designates an initial trustee or two or more initial co-trustees. The trust agreement also designates one or more successor trustees in the event that the initial trustees are no longer able to serve (i.e. in cases of death, removal, or resignation). The trust agreement should include the circumstances under which a trustee may be removed by the trustor.
Understanding How Removal Works in a Revocable Trust
It is important to note that the removal of a trustee is governed both by the trust agreement and by state law. When looking at a trust agreement, in a revocable trust, the trustor may amend the trust agreement in order to remove a trustee. Trust agreements typically allow the trustor to have the ability to remove a trustee, and this may be done at any time and also may be done without the trustee giving a reason. However, in an irrevocable trust, the trustor cannot remove a trustee.
As mentioned, state law also plays a role in removal by providing guidelines about a trustee’s fiduciary duty, or their obligation to follow the terms of the trust agreement, to act in good faith, and to act in the best interests of the beneficiaries. A trustee may be removed legally by co-trustees or beneficiaries if the trustee violates the requirements of the trust agreement, mismanages trust assets, participates in fraud, is proven to have the inability to cooperate with other trustees, conflict of interest, mental incapacity, or financial insolvency of the trustee (i.e. filing for bankruptcy). In addition, there are guidelines for removal by a trustee and removal by beneficiaries, in addition to filing a court petition for removal. These matters can be complicated and stressful, but connecting with an experienced trust and estates attorney could make a ll the difference.
Speak with a Boulder, Colorado Trusts and Estates Attorney for Help Answering Your Questions
Attorney Diedre Braverman is licensed to help our clients with trusts and estate matters. She’s also a CERTIFIED FINANCIAL PLANNER™ qualified to coach clients. For all other estate planning needs, the Braverman Law Group has years of experience crafting plans for our clients. To schedule a free, no-obligation consultation with one of our trusted attorneys, give us a call today at (303) 800-1588.