When Trustees No Longer Earn Your Trust

Authored by: Michael C. Levy, Esq.

When choosing a trustee, it is difficult to assume every possible outcome of the trustee/beneficiary relationship.  Despite using due care and judgment in selecting the trustee, conflicts still arise, often to the point where the relationship must be severed.  But, given that most trusts do not give beneficiaries the right to remove a named trustee, terminating that relationship is not always easy.  Fortunately, most states including New York provide trust beneficiaries with a mechanism to remove a trustee if these unfortunate stalemates occur.

Under New York law, there are several grounds by which a beneficiary can petition the court for removal of a trustee.  These include waste of the trust assets by the trustee; improvident management of the trust assets; dishonesty or other misconduct by the trustee; obtaining an appointment by misrepresentation of a material fact (such as financial management expertise); and any other reason a court may find the trustee unsuitable to manage the trust assets.

The specific actions taken by a trustee to warrant removal remain undefined by the Court and each case will be determined based on the facts specific to the trust and trustee in question.  However, certain factors will be considered by the Court in making their determination such as whether the trustee has discretion over distributions to a beneficiary he or she is feuding with; the degree of the hostility that exists between the trustee and the beneficiary(ies); and whether the Trustee is also a beneficiary.

In trusts where there are more than one trustee, a co-trustee may also seek to remove a Trustee they believe to be acting improperly.  Co-trustees are required to voice their dissent to any action that a trustee takes that the co-trustee deems improper.  In some situations, the disagreement between trustees may grow so severe that removal or resignation of a trustee is the only option.

Trustee appointments are generally made for life, but should conflict arise, it is important for both beneficiaries and other trustees to consider removal to ensure that the Trust assets are protected.

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