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Biddle Law Estate Planning Blog

Monday, February 12, 2018

Protecting Your Beneficiaries from a Bad Trustee

Your trustee is supposed to be extremely ethical, responsible, and have the best interests of your beneficiaries at heart. They should carry out their duties as you intended and act for the benefit of your trust and those who receive its assets. However, unfortunately, trustees may not always be up to this task. What happens if you pick a bad trustee or someone who cannot carry out his or her duties? Can you set up your trust to address this type of problem? The short answer is “Yes”!

Your Rights to Change a Trustee

If your trustee is in charge of a living trust or irrevocable trust, you may be able to make some changes yourself. Nonetheless, you can only make this type of change if the trust document allows it. If the trust is revocable, however, you can also revoke the trust entirely and re-establish it with another trustee.

Beneficiaries’ Right to Change a Trustee

You are far more likely to need to make a trustee change after you have passed. In these situations, you may want to set up your trust so that the beneficiaries can remove the trustee themselves. You can also set up a successor trustee as well.

You can set up specific situations in which the beneficiaries are allowed to remove the trustee. You may need to be particular about those circumstances, however. For example, you may want to include provisions that will remove a trustee when:

  • The trustee refuses to provide an accounting;
  • The trustee has acted in a way that makes the trust insolvent; or
  • The trustee has physical or mental problems that inhibit his or ability to continue as the trustee.

You can dictate virtually any other situation that would warrant removal of a trustee. Under California law, beneficiaries will be able to remove a trustee under certain circumstances, even if replacement is not contemplated in the trust document. These reasons include:

  • Mismanagement of trust assets
  • Serious health problems
  • Excessive compensation
  • Failure to perform trust duties
  • Fighting among co-trustees
  • Lack of fitness to carry out necessary functions
  • Financial insolvency

Filing to Remove a Trustee

If your beneficiaries have a good reason to remove the trustee, they can do so by submitting a California Petition to Remove Trustee. It sets out why they want the trustee removed and states identifying information. Only settlers, beneficiaries, or a co-trustee has standing to file this type of Petition with the Court.

Naming a Successor Trustee

It is a good idea to name a “second-string” trustee when you create your trust. However, your beneficiaries may be able to appoint their own successor trustee as well. They simply have to find someone or an entity willing to serve as the trustee. This is often a financial institution or a bank.

Getting Help with Problem Trustees

Whether you are a beneficiary, settlor, or co-trustee, you have options in dealing with a bad trustee. Contact our team to discuss your options and to get the process started. We can help you decide whether you can work out any conflicts or if replacing the trustee is a good idea for your unique circumstances.


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