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Home » Can a Trustee Be Fired?

Can a Trustee Be Fired?

April 12, 2022 by Stephen Unsworth

Essex Junction trust administration attorneys

If you have included a trust in your estate plan, one of the decisions you made when creating that trust is who to appoint as the Trustee of the trust. A Trustee is responsible for managing and investing trust assets and administering the trust according to the terms created by the Settlor. The success, or failure, of a trust is often determined by how well the Trustee performs his/her duties and responsibilities. If problems arise though, can a Trustee be fired? The Essex Junction trust administration attorneys at Unsworth LaPlante, PLLC explains when and how a Trustee can be removed and replaced.

Authority to Remove/Replace a Trustee

Who has the authority to remove a Trustee? There are several different possible answers to that question, depending on what type of trust is involved and the terms of the trust itself. Trusts are broadly divided into two categories – testamentary and living trusts. Testamentary trusts don’t activate until the death of the Settlor whereas living trust activate during the Settlor’s lifetime. Living trusts are also divided into revocable and irremovable living trusts. If the trust involved in a revocable trust, the Settlor always has the option to modify or revoke the trust. As such, the Settlor can remove a Trustee if the trust is revocable. If the trust is irrevocable, the Settlor does not have the power to remove the Trustee. The Trustee himself/herself can also decline the appointment or resign his/her position down the road in most cases. The beneficiaries of a trust may also have the power to remove the Trustee is specifically given that power in the trust agreement by the Settlor of the trust. If the power is not specifically delineated in the trust agreement, the beneficiaries would need to petition the court for approval to remove the Trustee.  Finally, the trust agreement may grant a specific person, or group of people, the power to remove the Trustee.

Reasons to Remove and Replace a Trustee

Removing a Trustee is not something to be considered lightly; however, some common reasons why you might want to remove a Trustee, including:

  • Failing to follow trust terms. A Trustee must abide by all terms as created by the Settlor unless a term is illegal, impossible, or unconscionable. A Trustee who fails or refuses to abide by the terms of the trust can be removed.
  • Mismanaging trust assets. A Trustee is in a fiduciary position, meaning that the Trustee must handle the trust assets with the utmost care. Furthermore, when a Trustee invests trust assets, the “prudent investor standard” must be used. The prudent investor standard requires the Trustee to only invest in risk averse options and to consider retention of the principal to be the most important consideration when making investments. If the Trustee does not act as a fiduciary or fails to invest using the prudent investor rule, removal may be warranted.
  • Self-dealing. A Trustee cannot engage in “self-dealing” which basically means that the Trustee cannot manage the trust assets or invest those assets with the intention, or goal, of benefiting himself/herself.  This is not to say that a Trustee can never benefit from a trust. In fact, sometimes a Trustee is also a beneficiary of a trust; however, the Trustee cannot make decisions with his/her own self-interest at the heart of those decisions.
  • Conflict of interest. Sometimes a conflict of interest arises between the Trustee and the trust purpose, the trust terms, or the beneficiaries of the trust. If that occurs, it usually best to remove the Trustee.
  • Good cause. The term “good cause” is effectively the “catch all” for situations that do not neatly fall into one of the common categories, but that call for the removal of a Trustee. Good cause can be used anytime a compelling argument can be made to the court for the removal of a Trustee, but the surrounding facts and circumstances do not fall into one of the previous categories.

Contact Essex Junction Trust Administration Attorneys

For more information, please attend one of our upcoming FREE webinars. If you have additional questions or concerns about how to remove and replace a Trustee, contact the experienced Essex Junction trust administration attorneys at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.

  • Author
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Stephen Unsworth
Stephen Unsworth
Stephen A. Unsworth is admitted to practice in both Vermont and Maine, and has more than 30 years of experience in estate planning and business law. His mission is to provide quality estate planning services, including assistance with Living Trusts, Wills, Medicaid Planning, Probate, Trust Administration, Powers of Attorney, Special Needs Planning, and Family Limited Partnerships.
Stephen Unsworth
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