I AM A BENEFICIARY AND I WANT TO REMOVE THE TRUSTEE: PART I

It sometimes happens that beneficiaries of trusts do not see eye-to-eye with the trust’s trustee(s). Disagreements may arise over the amount of distributions being made, the investments made by the trustee, or the specific property being distributed.

Unless you are the grantor of the revocable trust, as a beneficiary your right to remove a trustee is generally limited. The first thing to remember is that the grantor specifically chose the trustee for a reason – it was someone who they trusted to act in your best interest, even if it goes contrary to what you, as the beneficiary, want. The second thing to remember is that if you have to go to court to get the trustee removed (discussed below), it’s going to be expensive, time consuming, and perhaps unsuccessful.

A beneficiary’s right to remove and replace trustees is governed by both the trust document itself, and by California law. The trust itself will generally set forth when and how a beneficiary or beneficiaries can remove and/or replace a trustee. Sometimes a majority vote of beneficiaries is all it takes to remove a trustee, with or without cause. Oftentimes, the beneficiary or beneficiaries are limited to appointing a trustee who is not related or subordinate to any of the beneficiaries within the meaning of Internal Revenue Code Section 672(c) (which generally means anyone related to you within one degree of kinship, and anyone that works for you cannot be a trustee).

Sometimes the trust states that a trustee may only be removed by a court, or the trust is silent on the issue, in which case the trustee of an irrevocable trust can only be removed by a court. To obtain a court order replacing a trustee in California, the beneficiary must file a petition in the probate court of the county where the trust is administered (meaning where the day-to-day activities of the trust are carried on by the trustee).

The court may remove a trustee for certain grounds set forth in statute. Per California Probate Code section 15642:

  • (1) Where the trustee has committed a breach of the trust (discussed below).
  • (2) Where the trustee is insolvent or otherwise unfit to administer the trust.
  • (3) Where hostility or lack of cooperation among co-trustees impairs the administration of the trust.
  • (4) Where the trustee fails or declines to act.
  • (5) Where the trustee's compensation is excessive under the circumstances.
  • (6) Where the sole trustee is a person [who may have been in a position to exert undue influence or fraud over the grantor, with exceptions].

Below is a brief description of the duties of a trustee according to California Probate Code.

California Probate Code at Sections 16000-16504 – Trustee Duties
TABLE OF TRUSTEE DUTIES
DUTY PROBATE CODE SECTION BRIEF DESCRIPTION
Duty to administer trust §16000 You have a duty to follow the terms of the trust and the law governing the administration of trusts.
Duty of loyalty §16002 You have a duty to administer the trust solely for the benefit of the beneficiaries of the trust.
Duty to deal impartially with beneficiaries §16003 You have a duty to not favor the interests of one beneficiary over another, except to the extent that the trust provides to the contrary.
Duty to avoid conflict of interest §16004 You have a duty to avoid transactions with the trust that will benefit you personally.
Duty not to require beneficiary to relieve trustee of liability §16004.5 You cannot require a beneficiary to waive their rights as a condition of distribution.
Duty not to undertake adverse trust §16005 You may not act as trustee of any other trust that has a competing interest with this trust.
Duty to take control of and preserve trust property §16006 You must marshal trust assets and take reasonable steps to preserve them.
Duty to make trust property productive §16007 Subject to certain exceptions, you have a duty to make the trust assets profitable. The subject of trust investments is complicated, and we will discuss this area with you in detail.
Duty to keep trust property separate and identified §16009 This is one of the most important duties you have. You have a duty to keep the assets and debts of the trust separate from your own. In other words, you should not commingle funds.
Duty to enforce claims §16010 You must take reasonable actions to pursue amounts that may be owed to the trust.
Duty to defend actions §16011 You have the duty to take actions to prevent a loss to the trust, such as by defending a lawsuit.
Duty not to delegate; exception §16012 Subject to certain expectations, you must perform actions on behalf of the trust yourself rather than having others act on behalf of the trust.
Duty with respect to co-trustees §16013 If you serve along with a co-trustee, you each have a duty to participate in the administration and prevent the other from committing a breach of the trust.
Duty to use special skills §16014 In managing the trust property, you must use at least ordinary business ability. However, if you have special skills, you will be held to a higher standard of care.
Duty to provide information to beneficiaries §§16060-16069 You have a number of duties related to providing financial and other information to beneficiaries (and in some cases, the settlor’s family members). We will discuss theses duties with you in detail.
Discretionary powers to be used reasonably §§16080,16081 Even if the trust provides that a particular action is entirely within your discretion, you have a duty to act reasonably in exercising that discretion.