Category: Trustees

When a Trustee Becomes a Burden: Knowing When to Fire Them

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The title of trustee implies that this position should be held by someone you find trustworthy, and for good reason. Serving as a trustee of a trust carries significant responsibility and duty not just to you as the trust’s creator but also to the beneficiaries who depend on accurate, faithful administration. 

While being named a trustee reflects a high level of trust and confidence, it is voluntary. No one can be forced to accept it. However, they can be forced out. 

The authority to remove a trustee may be determined by you and laid out in the terms of your trust or, in some cases, by the default rules of state law. Depending on the circumstances, this authority may rest with the beneficiaries, other people affected by the trustee’s actions, or the court. Permissible reasons for removing a trustee can range from mismanagement to conflicts of interest to incompatibility. 

Because replacing a trustee can disrupt trust administration and impose additional costs, it is crucial that you select the right trustee at the outset and name backups in case the original trustee can no longer hold that position.

What Is the Role of a Trustee in a Trust?

The word trust entered the English language around the year 1200, likely derived from the Old Norse word traust.1 It originally meant faith or confidence, later expanding to include believing or relying on someone or something.2 The word “trustee” emerged in the 1640s to describe someone entrusted with the responsibility of managing property or affairs for the benefit of others.3

In modern legal terms, a trustee is the person or organization appointed to hold legal title to property and administer it according to a trust’s terms. A trustee’s responsibilities vary based on the type of trust and the instructions in the trust agreement and state law, but they often include: 

  • Managing and investing the trust’s accounts and property (assets) to maintain and grow their value
  • Paying bills, taxes, and other expenses related to the trust or its assets
  • Making distributions to beneficiaries as outlined in the trust document
  • Maintaining accurate records and preparing reports for beneficiaries
  • Filing necessary tax returns on behalf of the trust
  • Communicating regularly with beneficiaries and responding to their requests for information
  • Acting impartially when there are multiple beneficiaries with competing interests
  • Protecting trust property from loss or damage, including insuring and maintaining real estate

Although trustees may have some discretion about how to fulfill these responsibilities, they must adhere to the trust’s terms as closely as possible. 

In addition, a trustee has a legal obligation, known as a fiduciary duty, to act with the highest standard of care and ethical conduct the law imposes, putting the beneficiaries’ interests ahead of their own. Any conduct that could be considered self-dealing or neglecting beneficiary interests may constitute a breach of this duty and may be grounds for removing the trustee. 

But who, exactly, can remove the trustee—and under what circumstances? 

Who Can Remove a Trustee?

Once lost, trust and confidence are difficult to recover in both personal and professional relationships. However, just as cutting somebody out of your life who has betrayed your confidence is not always easy, neither is removing a trustee from their position. 

Even if someone believes the trustee has failed in any of their responsibilities, they must have legal standing to contest the trustee and initiate the legal process for removing them. For a person to have legal standing, the trustee’s actions must directly affect them. 

As the trust’s creator, you are typically the one affected while you are still alive. After your death, the person affected is usually a trust beneficiary. 

Generally, a trustee may be removed by any of the following:

  • Grantor. As the trust’s creator, you may remove a trustee while you are alive, the trust is revocable, and you are not serving as the trustee.
  • Beneficiaries. In the case of irrevocable trusts or after your death with a revocable trust, beneficiaries may remove a trustee, usually with court approval and for good cause, unless the trust document specifies different requirements.
  • Co-trustees. Sometimes, a co-trustee may remove a fellow co-trustee, though this action may require court involvement.
  • Courts. When no other party has authority to act or disputes arise that require judicial intervention, the court can order a trustee’s removal.

Each scenario has its own rules and challenges. Here is how trustee removal typically works:

Revocable Trusts (While the Grantor Is Alive)

When a trust is revocable, you retain full control during your lifetime, including the ability to

  • remove and replace a trustee at any time,
  • amend or restate the trust’s terms, and
  • revoke the trust entirely.

No court involvement is needed. As long as you are legally competent (i.e., of sound mind), you can change the trust’s terms whenever and for whatever reason. 

Note: While in most cases the grantor of a revocable trust serves as trustee while they are alive and well, they are free to step down whenever they want. If they remain of sound mind, they can still replace a trustee even if they have stepped down.

Revocable Trusts (After the Grantor’s Death)

The situation changes once a revocable trust becomes irrevocable—usually upon the grantor’s death. Now the beneficiaries may be watching and questioning the trustee’s performance.

However, being a trust beneficiary does not automatically result in a right toremove a trustee; the trust document or state law must specifically grant that power. Sometimes, the trust document will dictate the process or requirements for removing a trustee. In other cases, the beneficiary must

  • petition a court, and
  • show “good cause” (such as mismanagement, breach of fiduciary duty, or conflicts of interest).

Some modern trusts appoint a trust protector, a third party named in the trust who is empowered to oversee the trustee. Depending on the trust’s terms, the trust protector may remove and replace trustees without court approval, helping ensure that the trust is carried out according to the grantor’s intent. The trust protector is sometimes described as “watching the watcher” or acting as the grantor’s voice after death.

Co-Trustees 

Sometimes, a trust may name more than one trustee to serve together in the role. Appointing co-trustees can provide checks and balances, continuity in management, and shared responsibility. Some scenarios that involve co-trustees include

  • a family member trustee paired with a professional trustee (to balance personal insight and financial expertise), or
  • two or more siblings named as co-trustees to share duties equally and ease the heavy burden of trust administration.

However, co-trustees do not always agree. When serious disagreements arise, especially if one believes another is breaching their fiduciary duties, the former may seek to have the latter removed. Unless the trust document gives co-trustees explicit authority to remove a fellow co-trustee, court intervention is usually required.

When one co-trustee is removed or resigns, the trust’s terms may appoint a successor trustee to take their place with the remaining co-trustee(s), or the terms of the trust may specify that the remaining trustee can act alone.

Reasons to Remove a Trustee

When a trustee accepts their role, they are legally bound to follow the grantor’s wishes as outlined in the trust document and in accordance with state law. This obligation stems from the trustee’s fiduciary duty to the beneficiaries; when a trustee is removed, it is typically because they have breached this duty.

Some common reasons why beneficiaries may seek a trustee’s removal are as follows: 

  • Failing to perform their duties. A trustee who neglects their responsibilities, whether due to inexperience, poor management skills, or outright refusal, can jeopardize the trust’s administration. 

Example: The trustee has not filed the required tax returns for two years and ignores beneficiary requests for updates, exposing the trust to penalties and interest.

  • Poor decision-making or mismanagement. Unless the trust says otherwise, a trustee does not have to act with bad intent to breach their fiduciary duty. Even if they are “trying their best,” a trustee who makes poor investment choices or mismanages assets might be considered to have breached their fiduciary duty. 

Example: The trustee invests nearly all the trust’s assets in a single risky stock and suffers major losses.

  • Conflicts of interest or self-dealing. A trustee must prioritize all the beneficiaries’ interests above their own, even if the trustee is also one of the beneficiaries. Actions that benefit the trustee personally may be grounds for removal.

Example: The trustee sells trust property to a company they own at below market value.

  • Hostility or deadlock. When a trustee has a strained relationship with beneficiaries or co-trustees, it can paralyze the trust’s administration and necessitate a new trustee. 

Example: Two sibling co-trustees refuse to communicate and cannot agree on distributions, leaving beneficiaries in limbo.

  • Inconvenience or unavailability. Life changes can make it impractical for a trustee to serve effectively.

Example: The trustee takes on a demanding new job or is dealing with personal challenges, leaving little time or focus for managing the trust. Deadlines are missed, and beneficiary concerns go unanswered.

  • Excessive fees. While trustees are often permitted to charge fees, excessive or disproportionate charges can drain the trust’s assets.

Example: A trustee’s annual or monthly fees exceed what is considered reasonable in that locality or are more than permitted under state law, steadily eroding the trust’s value.

  • Incapacity or illness. A trustee may become unable to fulfill their role due to health issues.

Example: The trustee develops dementia and can no longer handle complex financial tasks.

If the trustee feels overwhelmed by their responsibilities or recognizes that they cannot fulfill them, they might resign voluntarily. If they do not, the beneficiaries can address the situation directly and request the trustee’sresignation. Sometimes, the matter can be resolved amicably without formal removal proceedings. However, if a trustee does not voluntarily resign, the next step may be to file a petition for their removal with the court. 

For beneficiaries, removing a trustee typically involves filing a petition in probate court and presenting evidence of the trustee’s misconduct or unfitness. If the court agrees, it can order the trustee’s removal and appoint a successor—or look to the backup successor you appointed in the trust document—to take over the trust’s administration. 

The Cost of Removal

Unfortunately, removing a trustee is not as straightforward as firing them, and it is not free, either. 

Once formal legal action has been initiated and the court gets involved, there can be significant legal fees. If the trust agreement permits, trust property may be used to cover these costs, but in some cases, the trustee or petitioning party may also have to pay legal fees out of pocket. 

Successor Trustees and Keeping a Plan Up to Date

To simplify trustee removal—if it becomes necessary—you should outline a process in the trust document for appointing a replacement trustee. That individual might be

  • a co-trustee currently serving, who will now serve alone;
  • a successor trustee named in the document; 
  • a trust protector who is granted authority in the trust to fill a vacancy in the trustee position; or
  • in their absence, someone appointed by the court.

With no clear succession plan, the following could happen: 

  • The court could name a trustee whom you do not know, who would not necessarily want to serve in that position, or who may not fully understand your intentions.
  • If a beneficiary must petition the court to appoint a new trustee, the process can be time-consuming and costly, resulting in trust management pausing until a successor steps in.
  • The time gap between removing a trustee and appointing a new one may disrupt trust administration, leading to delays in distributions that may cause financial hardship for beneficiaries, missed filing deadlines with potential penalties, lapses in bill payments for trust-owned property, and other issues. 

As part of your ongoing estate plan review, you should review the individuals you have appointed as key decision-makers in your estate plan—including trustees and successor trustees—every few years or whenever circumstances change. Relationships evolve, situations shift, and sometimes people come in and out of your life. If a rift develops between you and an appointed person or between your chosen trustee and a named beneficiary, you may need to add or replace your selections to keep your plan effective.

Choosing the right—or wrong—trustee can make or break your estate plan. Trust our estate planning attorneys to answer your trust and trustee-related questions. 

  1. Origin and history of trust, Etymonline, https://www.etymonline.com/word/trust (last visited Aug. 22, 2025). ↩︎
  2. Id. ↩︎
  3. Origin and history of trustee, Etymonline, https://www.etymonline.com/word/trustee (last visited Aug. 22, 2025). ↩︎

5 Reasons Uncle Bill May Not Make a Good Trustee

5 Reasons Uncle Bill May Not Make a Good Trustee

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If you have created a trust that you intend to last for decades, choosing the right trustee is critical to ensuring the trust’s longevity and ultimate success. 

Initially, you may think that a family member (for example, Uncle Bill to your children, who are the initial beneficiaries of your trust) will be the best choice as trustee. After all, Uncle Bill understands your children’s personalities and varying needs, and since Bill has always been frugal, he will surely keep the costs of administering the trust down. These are good reasons to possibly select a family member like Bill to serve as trustee.

However, Uncle Bill may not make a good trustee for a long-lasting trust, as he may not be equipped to handle all of the obligations on his own. He may need to hire legal, investment, and tax advisors to ensure that the trust is distributed, managed, and invested as you intended. These expenses have the potential to be the same (and, on rare occasions, more) than the fees of a professional trustee or a corporate trustee, such as a bank or trust company. Many professional and corporate trustees can meet all of the fiduciary obligations of a trustee under one roof for one comprehensive fee. 

Below are five reasons you may want to consider choosing a professional or corporate trustee for your trust instead of Uncle Bill:

  1. Professional and corporate trustees do not have a potentially disruptive personal life. A professional or corporate trustee does not become ill or die, marry or divorce, have children or grandchildren, go on vacation, move abroad, or have day-to-day distractions that could get in the way of properly administering your trust. The named professional or corporate trustee will likely be a bank or private trust company. If the person designated by the bank or trust company to act as trustee is unavailable, someone else from the bank or trust company can step in without court or beneficiary involvement.
  2. Professional and corporate trustees are unbiased. A professional or corporate trustee will not favor one of your children over another (unless that is what you intended) and will act in an unbiased manner to make distributions that benefit both the current and remainder beneficiaries. They are not part of your family and therefore will not be tempted or swayed by unrelated drama between family members.
  3. Professional and corporate trustees avoid conflicts of interest and self-dealing.  Professional and corporate trustees will not sell the family company or vacation home (that you intended to eventually go to your grandchildren) to themselves or a friend at less than fair market value. Any sale or other transfers will be made according to the stated wishes in the trust and should not personally involve the professional corporate trustee.
  4. Professional and corporate trustees invest appropriately. Professional and corporate trustees are typically more skilled at managing and investing assets, with access to experienced financial advisors and divestment investment strategies. For example, a professional or corporate trustee may better understand that, subject to any specific instructions in the trust, they should not invest trust assets (accounts, property, etc.) in real estate or a high-risk hedge fund but should instead diversify the portfolio to benefit both the current and remainder beneficiaries (the ones entitled to benefit from the trust after the current beneficiary).
  5. Professional and corporate trustees have expert knowledge. A professional or corporate trustee will not need to hire a slew of attorneys and accountants to interpret the trust agreement and will keep current on changes in the laws governing trusts, fiduciaries, and taxes.

Final Considerations

From managing the current and remainder beneficiaries’ requests and expectations and providing them with periodic reports regarding trust assets, liabilities, receipts, and disbursements to prudently investing trust assets and preparing and filing all required tax forms, a trustee’s duties and responsibilities are extensive. 

A professional or corporate trustee, rather than Uncle Bill, may be the best option for your trust. Please contact our office if you have any questions about selecting a trustee or using professional or corporate trustees so that we can assist you in designating the right individual or entity to serve as your trustee.

Investment and Distribution Trustees: Why Would I Need Both?

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When creating a trust, it is common to name yourself as the initial trustee who is responsible for all aspects of administering the trust. However, when considering who will take over when you can no longer act (either because of illness or death), it is sometimes helpful to divide the responsibilities between two or more successor trustees. For example, you may decide to have one trustee who manages the accounts and property held by the trust and another trustee who makes decisions about distributions to the trust’s beneficiaries. There are some important reasons why you may want your trust document to bifurcate the trustees’ duties in this way.

Benefit from specialized knowledge or aptitudes. Trustees have a variety of duties and responsibilities in administering a trust, and it is sometimes beneficial to divide them up between more than one trustee based upon the expertise or skills needed to perform a particular aspect of the trust’s administration. For example, if your sister-in-law is knowledgeable about investments and experienced in making financial decisions, but is not as skilled at handling potentially difficult interpersonal interactions, it may be beneficial to name her as your investment trustee, which is a trustee whose sole duty is to make discretionary decisions about the investment of funds held by the trust. 

Some trusts call for distributions to be made to beneficiaries at the trustee’s discretion rather than mandatory distributions of a certain amount or percentage at specific times. For trusts that provide for discretionary distributions, it may be helpful for another trusted person capable of making impartial decisions, skilled at communicating with others, and familiar with the beneficiaries of the trust and their needs to be named the distribution trustee, which is a trustee responsible for making decisions about whether and when to accumulate or distribute the income or principal of the trust. 

This division of responsibilities is particularly helpful if there are any difficult relationships or potential conflicts between beneficiaries or between one of the trustees and a beneficiary. For example, if your second wife is one of the trustees of the trust but the beneficiaries of the trust are your children from your first marriage, naming an unrelated third party as the distribution trustee may avoid hard feelings or the perception of unfairness related to distributions. Although it may be more expensive to have two or more trustees instead of a single trustee, the additional expense may be worthwhile to maintain family harmony and avoid damaging relationships. 

Gain additional asset protection. Most creditors may not reach a beneficiary’s interest in a trust if the trustee is not required to make distributions. Some creditors may be limited in how much they can reach if distributions are based on an ascertainable standard such as for the health, education, maintenance, and support (HEMS) of the beneficiary. Depending on state law, this may be true even if the beneficiary is also the sole trustee. 

However, the general rule is that the less control a beneficiary has over the trust’s accounts and property, the more protection is provided against creditors’ claims. Even if the beneficiary of the trust is also the investment trustee, greater asset protection may be available if a separate distribution trustee is appointed who is empowered to make distributions to the beneficiary in their sole discretion. In some jurisdictions, the trust could also provide that the beneficiary could resign as a trustee and appoint another independent trustee to take their place. This might further enhance the level of asset protection if the beneficiary is concerned that they may become more vulnerable to creditors’ claims in the future.

Note: This asset protection is typically not available for certain creditor claims, such as for child support or alimony or tax debts. The list of “exception creditors” varies by state and should be discussed with your estate planning attorney.

Minimize taxes. When a trustee has total discretion to make distributions from the trust to themselves or others, the value of the trust’s accounts and property may be included in the trustee’s estate for estate tax purposes, or the trustee may be taxed on the trust income under Internal Revenue Code (I.R.C.) § 678. Depending on the type of trust and the goals it is designed to achieve, an independent trustee could be appointed to minimize either estate or income taxes. 

Example: To avoid having the property held by the trust included in their estate for estate tax purposes, a trustee who is also a beneficiary may be permitted by the terms of the trust to select an independent distribution trustee, as long as that distribution trustee is actually independent—not a related party or a person subordinate to the beneficiary as defined by I.R.C. § 672(c). In this situation, the investment trustee who is also a beneficiary will not have direct control over the amount or timing of the distributions, but they may still retain significant control over who serves as the independent co-trustee. In addition to choosing the independent distribution trustee, the trust document may provide that the beneficiary can replace the independent trustee at any time and for any reason. 

Example: If your trust is a nongrantor trust—i.e., a trust that is a separate entity for tax purposes that pays taxes on trust income at the trust level—it is important for someone other than the grantor (the person who creates the trust) or any party who is related or subordinate to them to be the investment trustee. This is because the power to determine trust investments may be considered to be the power to control the beneficial enjoyment of the trust assets under I.R.C. § 674, which would mean the grantor, rather than the trust, must pay taxes on the trust income.  

Give Us a Call

If you would like to find out more about whether you should appoint separate investment and distribution trustees, give us a call to set up an appointment. Although having more than one trustee will make the trust more complex, and additional fees may be required for the services provided by the trustees, you may decide that the benefits far outweigh any additional costs. We can help you design your trust in a way that best achieves your goals by maintaining family harmony, protecting assets, and minimizing taxes.

man on computer looking at trust documents

How to Protect Yourself from Claims of Self-Dealing When Serving as a Trustee

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What Is Self-Dealing in Trust Administration?

A trustee usually has quite a bit of discretion in their management of a trust’s accounts, money, and property (known as assets). At the same time, as a fiduciary, a trustee also owes the trust’s beneficiaries a duty of loyalty, which prohibits the trustee from self-dealing. In the simplest terms, self-dealing happens when a trustee uses the trust’s assets for their own benefit instead of for the beneficiaries’ benefit. Despite this simple definition, self-dealing can be much harder to identify in practice and is often done in ignorance, particularly when there are complicating factors such as the trustee also being a trust beneficiary.

Some common examples of self-dealing are a trustee

  • making gifts to themselves from the trust’s assets;
  • borrowing money from the trust;
  • investing the trust’s assets in their own business;
  • investing in high-risk investments for their own benefit;
  • selling property to or buying property from the trust;
  • mixing the trust’s assets with their personal assets;
  • paying themselves more than a reasonable amount of compensation;
  • receiving kickbacks from a third party compensated from the trust’s assets; and
  • when also a beneficiary, making a distribution to themselves but not to any other beneficiary or making a larger distribution to themselves than to any other beneficiary.

Examples of Innocent Self-Dealing

Let us look at some real-life scenarios that demonstrate how a trustee may engage in self-dealing without even realizing it or while thinking that they are benefiting the beneficiaries.

Example 1. Tom is the eldest son of Dad and Mom. Over the years, Tom has proven himself to be hard-working and reliable and has assumed most of the responsibility for running the family business that supports Dad, Mom, Tom, and Tom’s three siblings. Not surprisingly, Dad and Mom select Tom as the trustee of their trust, with Tom and Tom’s brother and two sisters as beneficiaries. Prior to Dad’s death, Dad instructs Tom that the trust’s assets are available for Tom to use so long as, in the end, all the beneficiaries (Tom and his three siblings) receive equal shares from the trust. After Dad’s death, Tom spends many hours doing trust administration tasks and does not take one cent of compensation from the trust even though, under the trust agreement and state law, he is entitled to reasonable compensation for his time. Tom and his brother decide to buy a yacht together. Unfortunately, neither one of them has enough money in his personal bank account to buy the yacht. Tom makes a loan of trust money to himself and his brother to buy the yacht but does not make a similar loan to either of his sisters. Is this self-dealing? What if Tom makes the loans to himself and his brother under arm’s-length terms, charging a reasonable rate of interest and requiring security for the loan? Under these additional facts, is this self-dealing?

Example 2. Tom from Example 1 wants to expand the family business. Tom, his brother, and one of his sisters own equal one-third shares of the company as partners. Tom’s other sister has no ownership interest in the company but is a paid employee. Tom uses trust money to fund his business expansion plans. Is this self-dealing?

Example 3. Sue, a successful physician, and her two brothers are the beneficiaries of a family trust. Sue is the trustee. The trust owns a lake house that Sue’s parents purchased when she and her brothers were young, and many happy family memories were made at that vacation home. Unfortunately, the trust cannot afford to pay the mortgage and property taxes and keep up the required maintenance on the lakefront home, and neither of Sue’s brothers can afford even a one-third share of the amount needed for mortgage, taxes, and maintenance. Sue knows that the home must be sold, but she cannot bear to part with the property that represents so many happy childhood memories. Sue decides that she will buy the vacation home from the trust at fair market value. Is this self-dealing? What if, prior to Sue’s buying the home, the market crashes and the property loses a fourth of its value, but Sue purchases the home at the higher value? Under these additional facts, is this self-dealing?

How Do I Avoid a Claim of Self-Dealing?

As these examples demonstrate, there is not always a clear-cut answer to whether a trustee is engaging in self-dealing. An inexperienced trustee may not even realize that they are breaching their fiduciary duties. However, there are a few safe harbor rules that a trustee can follow to ensure that they will not be accused of self-dealing and find themselves involved in an unwanted lawsuit.

First, a trustee can engage in an action that might otherwise be categorized as self-dealing if the trust instrument authorizes it. So in Example 1 above, if Dad had wanted to allow Tom to use the trust’s assets in any way Tom saw fit as long as in the end all beneficiaries received equal shares, Dad should have made sure that such an instruction was included in the written trust instrument instead of being a separate oral instruction.

Second, a trustee can seek the approval of the trust beneficiaries for any action or inaction. If, after all facts are fully disclosed, the beneficiaries consent to the trustee’s proposed course of action or later ratify it, a trustee will not be guilty of self-dealing. So in Examples 2 and 3, if Tom and Sue had approached their siblings and explained what they planned to do, and their siblings had given them the go-ahead (preferably in writing), Tom and Sue would not be engaging in self-dealing.

Finally, a trustee can seek court approval of their actions. Nevertheless, any trustee looking to protect themselves from claims of self-dealing would be wise to avoid any transaction in which they stand to benefit unless the trust instrument specifically authorizes such action or they are transparent about the transaction and the beneficiaries consent to it.

If you are or will be a trustee of a trust in the future and have questions about the best way to fulfill your trustee duties, contact us. We would be happy to sit down with you and assist you with your role.