To make sure a trust works the way you want it to, it’s important to choose a trustee you can count on to follow your instructions. However, to prevent long and complicated legal fights if the trustee isn’t doing well, think about allowing the people who benefit from the trust the power to remove a trustee or replace them.

What’s The Role Of A Trustee?

A trustee is the person who has legal responsibility for administering a trust on behalf of the trust’s beneficiaries. Depending on the trust terms, this authority may be broad or limited.

Generally, trustees must meet fiduciary duties to the beneficiaries of the trust. They must manage the trust prudently and treat all beneficiaries fairly and impartially. This can be more difficult than it sounds because beneficiaries may have competing interests. The trustee must balance out their needs when making investment decisions.

The decision about naming a trustee is similar to the dilemma of choosing an executor. The responsibilities require great attention to detail, financial acumen, and dedication. Because of the heavy reliance on investment expertise, choosing a professional over a family member or friend is often recommended. At the very least, make it clear to the trustee that they may — and should — rely on professionals as appropriate.

What’s Considered “Cause?”

If you don’t provide the trust’s beneficiaries the option to remove the trustee, their only recourse would be to petition a court to remove the trustee for cause. The definition of “cause” varies from state to state, but common grounds for removal include:

• Fraud, mismanagement, or other misconduct
• A conflict of interest with one or more beneficiaries
• Legal incapacity
• Poor health
• Bankruptcy or insolvency if it would affect the trustee’s ability to manage the trust

 
Not only is it time consuming and expensive to go to court, but most courts are hesitant to remove a trustee that was chosen by the trust’s creator. That’s why including a provision in the trust document that allows your beneficiaries to remove a trustee without cause if they’re dissatisfied with their performance may be a good idea. Alternatively, you may want to authorize your beneficiaries to remove a trustee under specific circumstances outlined in the trust document.

Other Options

If you’re concerned about giving your beneficiaries too much power, you may want to include a list of successor trustees in the trust document. That way, if the beneficiaries end up removing a trustee, the next person on the list takes over automatically, rather than the beneficiaries choosing a successor.

Alternatively, or in addition, you could appoint a ‘trust protector’ with the power to remove and replace trustees and make certain other decisions regarding management of the trust. Contact us for additional information on the role a trustee plays.