What Can a Beneficiary Do If the Trustee Refuses to Deal?

By David Carnes

The trustee of a trust is required to act as a legal fiduciary on behalf of trust beneficiaries. If the trustee refuses to perform his obligations with respect to the trust, a beneficiary might be able to take advantage of several possible remedies to ensure fair treatment by the trustee.

The trustee of a trust is required to act as a legal fiduciary on behalf of trust beneficiaries. If the trustee refuses to perform his obligations with respect to the trust, a beneficiary might be able to take advantage of several possible remedies to ensure fair treatment by the trustee.

Trustee Duties

A trustee cannot be removed or ordered to perform certain acts unless he has violated the express terms of the trust or failed to perform his legal duties in some way. Trust deeds often vest trustees with considerable decision-making discretion. Generally, trustees are charged with observing two main fiduciary duties: the duty of loyalty and the duty of care. The former requires the trustee to manage trust assets in a manner that enhances the best interests of the beneficiaries, within limits stipulated by the trust deed. He may not profit from his administration of the trust except to collect a reasonable fee for his services. The duty of care requires him to manage trust assets with at least as much care as a prudent person would exercise in managing his own assets. Additionally, in most states, the law requires a trustee to provide periodic accountings to beneficiaries detailing his disposition of trust assets.

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Trust Deed

The terms of the trust deed may impose specific obligations on the trustee, such as the duty to distribute certain trust assets to certain beneficiaries on a particular date. Refusal to perform these duties can render the trustee subject to judicial removal. The trust deed may also provide procedures for removal of a trustee and replacement with a successor trustee – upon unanimous agreement of the beneficiaries, for example. Some trust deeds appoint a "trust protector," whose sole function is to hire and fire trustees. If the trust has a trust protector, you might present your grievances to him and ask that the trustee be replaced.

Court Orders

A state court presiding in the state where the trust was created has the power to remove the trustee or order the trustee to perform his duties as prescribed by the trust deed and state law. In response to a petition filed by a trust beneficiary, a court may order the trustee to provide a written accounting of trust assets to the beneficiary. The court may approve a petition to remove a trustee if that individual has violated the terms of the trust or the obvious intentions of the trust grantor. A trustee may also be removed if he has acted dishonestly or incompetently, if he has violated state trust law, or if he has become incapable of administering the trust for health reasons or otherwise. Thus, a court may order the removal of a trustee if he has embezzled trust assets, if he refuses to distribute trust assets as required by the trust deed, or if he has become too ill to communicate with trust beneficiaries.

Revocation

A trust can be set up as either revocable or irrevocable. If the trust deed is silent on the matter of revocability, different presumptions apply from one state to the next – for example, California presumes a trust to be revocable unless the trust deed states otherwise. A trust becomes automatically irrevocable when the grantor passes away. If the trust is revocable, you may ask the grantor to revoke it and establish a new trust with a new trustee. This does not require a court order. If it is irrevocable, some states allow it to be revoked without a court order if the trust grantor and all beneficiaries consent. Revocation of an irrevocable trust will allow the trust grantor to establish a new trust with a new trustee. If the trust grantor has died, all of the beneficiaries may agree to seek a court order to revoke the trust and distribute its assets to them. A court will revoke the trust only if the reasons for revoking it outweigh the original intent of the trust, or if circumstances have changed such that revocation would further the trust's original purpose.

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Removing a Successor Trustee

References

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