How Do You Terminate a Trustee?

Executive summary

• After a trustor’s death, only certain parties, like beneficiaries, co-trustees, and the court have the power to remove a trustee.
• In order to pursue a trustee removal, the party must have grounds for removing the trustee, like incapacity, acts of misconduct, or a failure to act.
• To terminate a trustee, beneficiaries must file a trustee removal petition with the probate court, compile evidence for their petition, and attend a court hearing to present their case.
• If you plan to pursue a trustee’s termination, you should contact a trust litigation attorney as soon as possible for support and guidance in the process.

Introduction

Creating a revocable living trust is an important step in comprehensive estate planning. Typically, you act as the trustee, ensuring your assets are managed competently while still alive. Then, when you pass away, your designated successor trustee will manage and distribute the trust’s property.

When you appoint your successor trustee, you should choose someone you have complete faith in to handle the trust appropriately and act in the best interest of the beneficiaries. However, your designated trustee may unexpectedly pass away or suffer a debilitating disease. 

There is also the chance that the trustee clashes with your beneficiaries. Or a chance that, over the years, they become irresponsible or sloppy. What can you or your loved ones do to terminate a bad trustee?

A trustee can only be removed under certain circumstances and by certain parties interested in the trust. The trustee removal process is a detailed one that includes a petition to the court and several hearings. Before bringing forward a petition for trustee removal, it’s important to be sure that you have grounds to pursue a trustee removal and that you have an understanding of how the process works.

On what grounds can a trustee be removed?

While alive, a trust creator can modify or terminate the trust as they please. This is the most straightforward process for terminating a trustee. However, once they have passed, the options become more limited.

In order to be removed, a trustee must commit an act that places them in violation of their trustee duty or is somehow prevented from fulfilling their duty to uphold the best intentions of the trust. Under California Probate Code 15642, the following actions are grounds for trustee removal:

Lack of capacity

One of the foundational requirements of a trustee is that they must have the mental capacity to serve in their role and make responsible decisions in the best interest of the trust. If the trustee lacks capacity to fulfill their duty adequately, then beneficiaries have the right to seek termination.

Examples of lack of capacity include:

• A trustee is subject to undue influence or fraud due to old age
• A trustee suffers from a health condition that restricts their mental capacity, such as dementia
• A trustee does not meet the age requirement to serve

A trust document may also outline what terms are necessary to remove a trustee from their role. For example, it may require that two doctors indicate that the trustee is unfit to serve before the trustee can be removed.

Trustee refusal to act

Even if an individual is named in a trust document, they are not obligated to serve as a trustee. In these cases, the trustee has the right to refuse to serve or, if they have already accepted their appointment, step down. In a rare instance that a trustee refuses to act but does not formally resign in accordance with California Probate Code 15640, then a party with standing may pursue a trustee removal.

Inability to cooperate with co-trustees

When there are multiple trustees responsible for administering a trust, then there may be situations where the co-trustees are unable to cooperate. An inability of co-trustees to cooperate can be particularly troubling for the proper administration of a trust because the default rule in California is that co-trustees must act unanimously. Disagreements may arise over factors like how to invest trust assets or how to sell real estate included in the trust.

Some disagreements can be common, but if there is a case where these disagreements are egregious, then a co-trustee may need to be removed. Extensive disagreements between co-trustees can unjustly delay the distribution of trust assets and prevent beneficiaries from receiving their inheritance—removing a trustee may ultimately speed up the process and benefit the trust.

A breach of trust by a trustee

One of the most common reasons to pursue a trustee removal is a breach of trust or a breach of fiduciary duty. A fiduciary duty is a legal obligation that one party has to another to act in their best interests. A breach of trust occurs when a trustee fails to act in the best interests of the trust or uphold their duties. Under California Probate Code §15642 that may cause the trustee to be removed from their position. 

This breach can occur either due to negligence or due to intentional malicious actions that harm the assets of the trust or prevent distributions from taking place in accordance with the wishes of the trustor.

Some examples of grounds for removing a trustee based on a breach of trust include:

• Conflict of interest with beneficiaries or trust property
• Ignoring or violating the terms of the trust
• Mismanaging trust property
• Engaging in fraud
• Charging excessive trustee fees
• Failing to provide beneficiaries with adequate notice or accounting

While certain of these allegations may seem straightforward on their face, they can often be challenging to prove. For example, no two people will have the same risk tolerance for investments. What the trustee may consider a prudent growth strategy, one of the beneficiaries may see as a speculative risk to their future wealth. Similarly, depending on the terms of the trust, reasonable minds might differ as to what the trustee’s duty is with respect to those terms.

Charging excessive fees

Trustees have the right to collect trustee fees for the services they provide in administering the trust. However, these fees should be reasonable and proportional to the services they provide. Professional trustees will generally charge more than a family member or individual who serves in the role.

If a trustee charges excessive fees, this amount comes out of the estate and can potentially reduce the inheritances that beneficiaries receive. Often, this issue is easily negotiable between beneficiaries and trustees. However, if trustees are unwilling to reduce the compensation they are seeking, beneficiaries can pursue trustee removal to protect their inheritance and the assets in the trust.

Who has the power to remove a trustee?

As mentioned above, the grantor can easily remove the trustee of a revocable trust. But once they have passed away, three different parties can petition the court to have a trustee terminated. These are a co-trustee, one or more beneficiaries, or the court itself. And, unless you are a co-trustee, beneficiary, or the guardian of a beneficiary, the probate court is unlikely to hear your petition. 

Co-Trustee

If a co-trustee suspects wrongdoing by their co-trustee, feels that the trustee is refusing to cooperate, or believes that they are unjustly delaying the trust administration process, they can pursue removal through the court. To do so, the co-trustee should consult the terms of the trust document to determine if it outlines terms for the removal of a co-trustee.

Beneficiaries

Beneficiaries of a trust have the right to petition for a trustee removal under both California and Texas law. If you believe a trustee is acting wrongly or irresponsibly, your first step should be to review the trust instrument. Trustees have a duty to provide any beneficiary with a copy of the terms of the trust, and you should check the document to see whether it has provisions for removing a trustee through a vote.

If the trust document does not outline specific provisions, then beneficiaries can pursue trustee removal through a court petition and by attending a hearing. It’s also a good idea for beneficiaries to consult the other beneficiaries before pursuing trustee removal. Having a cohesive agreement amongst beneficiaries will demonstrate to the court that they agree on the trustee’s fitness to serve and serves as additional testimony of the need to remove the trustee.

The Probate Court

Although it is rare, the court can also terminate a trustee through its own motion without any interested parties filing a petition for removal. The court can issue an order to remove the trustee and call for the appointment of a replacement trustee. This can occur if the court feels that the trustee has harmed the trust or has reason to believe they may harm the trust in the future based on past actions.

There can be a variety of circumstances where the court deems it necessary to remove a trustee. For example, if the trustee is convicted of a crime and must serve time in jail, the court may also decide to remove the trustee to avoid delays in the trust administration process. Other instances may include if the court feels that the trustee lacks capacity to serve or does not meet the requirements to serve.

How do you remove a trustee from a trust?

Once you establish that you have grounds to remove a trustee and the power to do so, you can begin to take steps to pursue their removal. The trustee removal process depends on the provisions outlined in the trust document. If there are no outlined provisions for removing a trustee, then the removal process must pass through the court.

Trust document provisions

A trust document will often lay out provisions for removing a trustee. A grantor of a trust has the power to put provisions for removing a trustee in the trust document itself. For instance, you can include a clause allowing a majority or supermajority of the co-trustees or beneficiaries to remove a trustee.

These provisions can be tailored to limited circumstances or broad in their application. For example, you can include this provision only in case of the trustee’s death or incapacity. You could also allow different triggers for a termination vote, such as conflicts of interest or fighting with the beneficiaries.

Even if you do not write removal provisions into your trust document, there are a variety of grounds for terminating a trustee. However, someone with proper standing will need to petition the probate court to have the trustee removed.

If the trust document outlines provisions for a trustee’s removal, then the trustee can be removed without a petition to the court. But if you find that the trust agreement is silent regarding how to terminate a trustee, you will need to petition the court for removal. And, in order for the probate court to consider your petition, you will need to be a party with proper standing, as noted above.

Court petition process

After understanding the terms of the trust document, you can begin the process for petitioning the court for removal.
 

When petitioning the court, you should take the following steps:

• Hire a trust litigation attorney – A trust litigation attorney will be able to provide you specific guidance on the unique details of your case and help you navigate the court system. They will be able to help you investigate wrongdoing and understand all the potential options available to you, like negotiations or settlements.
• File a trustee removal petition with the court – This petition will need to specify all the reasons you believe you are justified in seeking trustee removal and should include evidence like correspondence with the trustee or available accountings. Your attorney will be an invaluable resource in this process by helping you compile evidence and file the petition with the court.
• Attend a hearing – This hearing allows all sides to present their case for removing the trustee, finding a replacement trustee, or defending the trustee. The judge may choose to remove the trustee, suspend the trustee until they can gather more information, or decide that the trustee committed no wrongdoing.

It’s also important to consult other beneficiaries and co-trustees when pursuing a court petition to have everyone on the same page. The more people you have on board with your case, the more likely you are to be successful in removing the trustee. Having other beneficiaries in support of the process will make it easier to compile evidence, demonstrate their concerns regarding the trustee, and share the costs of potential legal fees.

Can a co-trustee be removed?

A co-trustee can be removed from their position like any trustee. As is the case for other trustees, a co-trustee can only be removed under certain circumstances. The process is the same for removing any other trustee. 

Under California Probate Code §15642, a trustee can be removed in accordance with the trust instrument by the court on its own motion, or on petition of a settlor, co-trustee, or beneficiary. California Probate Code §17200 provides remarks that a trustee or beneficiary of a trust may petition the probate court concerning the internal affairs of the trust, which includes the removal of a trustee. 

The most common case for removing a co-trustee is when there is conflict between two trustees that prevents progress from being made during the trust administration process. Sources of conflict can include disagreements regarding how to best manage trust assets or a trustee attempting to take actions for personal gain.

A co-trustee can agree to step down themselves or be forced to be removed legally as required by the court. In the event that a trustee is removed, they can either be replaced with a new co-trustee or removed with full responsibility left up to the other co-trustee. 

Although removing a co-trustee may create a delay in the trust administration process, it may ultimately offer benefits for the beneficiaries, especially if disputes between co-trustees are delaying the process even further. Removing a co-trustee in the right circumstances can allow beneficiaries to receive their inheritances quicker.

How long does it take to remove a trustee?

There is not a simple, set timeframe for how long it will take to remove a trustee. The length of the process for trustee removal depends on several factors. In some cases, it can take a year or longer to remove a trustee.

The time it takes to remove a trustee often depends most on two key factors:

• Case complexity – If a trust is complex with many beneficiaries to notify and consult, many assets to manage, or other concurrent legal disputes happening, it can take considerable time to gather evidence of trustee wrongdoing, consult the trust’s accountings, complete a removal petition, and notify other interested parties.
• Court proceedings – Court proceedings are not always straightforward, so the time it takes for court proceedings to begin can vary, as there may be delays in scheduling court hearings if the court is backlogged or you must complete procedural requirements like completing necessary documentation or discovery.

Whether you pursue the route of negotiation or litigation will also impact how long the process takes. The trustee removal process will always be quicker and easier if the trustee removal can bypass the courts and achieve a settlement or resolution through negotiation.

It’s important to manage your expectations for the process and understand that it’s unlikely you will find a resolution to your case shortly after beginning the removal process. Keep in mind that this can cause significant delays in the trust administration process.

In instances where a trustee is actively harming a trust, a judge may order the suspension of a trustee until they can gather more information. A suspension will extend the time it takes to formally remove the trustee and delay the trust administration process but will protect the assets of the trust in the meantime.

How to remove a trustee from an irrevocable trust

Removing a trustee from an irrevocable trust can look different than the process for a revocable trust. Most trusts are revocable, which means that the settlor can modify or revoke the trust at any time before their death as long as they have the mental capacity to do so. However, irrevocable trusts have constraints on modifying the terms of the document.

With a revocable trust, a settlor can remove a trustee at any time before their death. In an irrevocable trust, the settlor does not have this power. Instead, a settlor must seek permission from other interested parties in the trust to remove the trustee, including co-trustees and beneficiaries.

However, after the settlor passes, the process for trustee removal in both a revocable and irrevocable trust looks very similar. Once a settlor dies, a revocable trust generally becomes irrevocable, unless there is a surviving settlor in place to take ownership of the trust.

At this point, for both revocable and irrevocable trusts, a trustee can be removed if the trustee decides to step down, if a party with standing petitions the court, or if the court intervenes.

Trustee removal petition

In cases where you must pass through the courts to terminate a trustee, the trustee removal petition is a necessary and crucial step. This petition must include evidence of any wrongdoing or other reasoning for promoting trustee removal to present to the court.

It’s important that this petition includes as much detail as possible in order to support the case for trustee removal. This may include documentation of significant interactions with the trustee, evidence that a trustee failed to fulfill their duties, or provisions in the trust that they failed to follow.

Some evidence that beneficiaries or co-trustees can present include:

• Medical records or other evidence highlighting the trustee’s incapacity to serve
• Accounting records that demonstrate irresponsible investments or transactions made by the trustee
• Communications from beneficiaries or co-trustees regarding a trustee’s refusal to cooperate
• Evidence of trustee self-dealing or mismanagement of trust assets

An attorney can help you follow the appropriate steps to file a petition with the court and ensure that you have all the necessary information included in your petition to maximize your potential for reaching the best possible outcome. If you do not have evidence of the trustee wrongdoing, an attorney can also support you in conducting an investigation.

Costs involved in trustee removal

If you are pursuing a trustee removal, then it’s a good idea to understand any potential costs involved in the process so you are prepared. Costs of trustee removal vary depending on the unique circumstances of each case—typically, if a removal process must pass through the court, costs will be much higher than if a trustee agrees to step down.

Costs involved in the process may include:

• Legal fees and court costs – If a case of trustee removal must go to court, then beneficiaries will be required to pay for the filing fees of the removal petition, court fees associated with attending a hearing, and fees associated with hiring an attorney.
• Reduction of trust assets – In cases where paying for the cost of legal fees comes from the trust itself, then the costs will reduce the amount available in the final distribution of assets.

In cases where a trustee is found to have been responsible for misconduct, they may be required to pay damages for lost assets or cover the court fees incurred by the beneficiaries. On the other hand, if you bring forward a petition for trustee removal without basis, then you may be ordered to pay the attorney fees they incur in establishing a defense.

However, it’s important to note that even if a trustee ends up being convicted of misconduct, the beneficiaries cannot seek court fees from the trustee proactively. They will be required to pay all legal fees upfront and can be reimbursed by the trustee, but only after the case has concluded.

How can a trustee defend themselves from removal?

For a trustee to defend themselves from removal, it’s essential for them to comply with their legal duties and obligations. As previously mentioned, a violation of these duties can be considered a removable breach of trust. Probate courts generally defer to trustees on conflicts between the trustee and beneficiaries. Often, the court will require the beneficiary to provide compelling evidence of wrongdoing before allowing a removal petition to advance beyond the initial stages.

Trustees also can use trust assets to fund their defense. While they cannot unreasonably draw down trust property to fight against a removal petition, a trustee who genuinely believes they did nothing wrong often will not need to spend their own money. 

Some states do allow beneficiaries to recover damages from a trustee if wrongdoing is found. But this can take proof of gross misconduct, such as fraud or embezzlement. Unless a trustee is a convicted criminal, sanctioned by a regulatory body (such as the SEC), or declared bankruptcy, these are high burdens for a beneficiary to clear. 

Consult our experienced trust litigation attorneys for support

To terminate a trustee, you must have and follow the necessary procedures for doing so. Be sure to talk to an experienced probate litigation attorney before starting any plan to terminate a trustee, as an attorney will ensure you have grounds for a petition and have a strong enough case to increase your chances of the best outcome.

At RMO, our attorneys are well-versed in cases of trustee removal and trust contests. With decades of experience in trust litigation, we will help you devise a winning strategy to protect the interests of the trust in question and help you secure access to your rightful inheritance.

Schedule a consultation with our attorneys at RMO to discuss the circumstances of your case.