Unlike a traditional will, a trust is a legal entity that owns property, has a federal tax ID number, and files tax returns. The trustee is the individual chosen by the trustor to manage the trust. A trustee has a fiduciary duty to:
- Protect the trust’s assets and invest appropriately
- Maintain accounts of all income/expenses
- Provide assets to beneficiaries as the trust directs
- File accurate, timely tax returns
- Act in the best interests of the trust
Removal of a Trustee
In some cases, the beneficiaries or the trustor (if still living) might petition the court to remove a trustee who breaches the fiduciary duties of the position. Some examples of a breach are:
- Disagreement between/among co-trustees
- Misconduct, mismanagement, or mishandling of assets
- Mental incapacity
- Undue influence
- Conflict of interest
- Failure to cooperate with vital parties
To have the trustee removed, the petitioners must present convincing evidence to the court:
- Testimony of accountants/financial experts
- Testimony of witnesses to the trustee’s breach
- Depositions/subpoenaed documents
Protection Against Trustee Removal
All interested parties pay close attention to the actions of the trustee, who cannot afford to make any errors in managing the trust. Any action that even appears to be a breach of duty could lead to court proceedings and possible removal.
If you’re a trustee, the best ways to protect yourself against removal are:
- For any action that might be questioned by parties to the trust, obtain consent and release from qualified beneficiaries as well as judicial approval from the court.
- Keep thorough, meticulous records and documentation of all your business dealings, investments, expenditures, communications, and transactions.
- Retain an attorney (who should be paid with the funds in the trust, not with your own money) to guide you in your role as trustee, so you don’t make mistakes that could result in a breach of duty.