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Can A Trustee Remove a Beneficiary From A Trust?

Photo of someone signing documents. Can a trustee remove a beneficiary from a Trust?

A trustee of a trust has powers listed in the trust document, and as specified by state law. They are in control of trust assets, and ultimately are charged with distributing money and property to the trust beneficiaries. But can a trustee remove a beneficiary from a trust? Keep reading to find out more about when and how a Trustee can alter the list of beneficiaries in a trust and what steps may be taken if the removal of a beneficiary is contested.

How Can a Trustee Remove a Beneficiary From a Trust?

There are a limited number of ways that a trustee can remove a beneficiary. In most cases, the Trustee of the trust document may remove a beneficiary according to the terms set out in the trust. The legal procedure for removing a beneficiary from the document generally differs from state to state, so it’s important to check with local laws before taking any action. Generally speaking, a Trustee must contact all beneficiaries prior to making the change, provide them with an explanation as to why they are being removed.

Here are some ways a trustee may be able to remove a beneficiary from a trust:

1. Amendment or Revocation.

If the trust document allows for amendment or revocation by the trustee, the trustee may have the power to remove a beneficiary by amending or revoking the trust.

2. Consent of Beneficiary.

If the beneficiary voluntarily agrees to be removed from the trust, the trustee may be able to remove them. For example, this could be done with the use of a Disclaimer.

3. Violation of Terms of the Trust by the Beneficiary.

If the beneficiary has breached the terms of the trust, such as by attempting to interfere with the administration of the trust or by engaging in criminal behavior, the trustee may be able to remove them.

4. Court Action.

The trustee may be able to seek court intervention to remove the beneficiary. This may involve demonstrating that the beneficiary has engaged in misconduct, that the beneficiary is incapacitated, or that removing the beneficiary is necessary for the proper administration of the trust. For instance, A.R.S. Section 14-10412 provides, “The court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practicable, the modification must be made in accordance with the settlor’s probable intention.”

5. Violation of No Contest Clause.

A No Contest Clause is a provision in a trust or will that basically says if someone does anything to contest the terms of the trust, they are removed as a beneficiary. Trustees will often claim that this protects them from having anyone question their actions. Of course, that can end up being like extortion.

But can a trustee remove a beneficiary of a trust if the beneficiary had probable cause to challenge the trustee’s actions?

In Arizona, a No Contest Clause is not enforceable as long as the person challenging the trust instrument or the trustee’s actions has “probable cause.” A.R.S. 14-10113 states:

A provision in a trust instrument that purports to penalize an interested person for contesting the trust instrument or instituting other proceedings or actions relating to the trust property is unenforceable if probable cause exists for the contest, proceedings or actions.

The process for removing a beneficiary from a trust can be complex and may involve legal proceedings. We suggest that you consult with a trust litigation attorney to determine the best course of action for your specific situation.

When Does a Trustee Have the Right to Remove a Beneficiary?

A Trustee may have the right to remove a beneficiary from a trust if it is specified in the terms of the trust document. There are various reasons why a Trustee may choose to remove a Beneficiary, including for tax purposes or to avoid legal disputes with other beneficiaries. It is important to note, however, that removing a Beneficiary will require approval from each of the remaining parties, and all changes must be reflected in documents and registered with the relevant authorities.

What Are the Limitations on a Trustee’s Right to Remove a Beneficiary?

There are limitations on a trustee’s ability to remove a beneficiary. For example, if the trust document stipulates that only certain people may receive distributions from the trust then this cannot be amended at the discretion of the Trustee. In addition, if the trust was created for a specific purpose, then removing a beneficiary would need to be done with special care and consideration.

What are valid reasons for removing a beneficiary from a trust?

There are several valid reasons for removing a Beneficiary from a trust. These may include demonstrating that the Beneficiary is no longer alive, if the Beneficiary has agreed to forfeit his or her interest in the trust, if the Beneficiary has been found mentally incapacitated, or if there has been a change in circumstances that makes it reasonable for them to be removed. If a Beneficiary is being removed due to any of these circumstances, proper documentation must be provided.

Have You Been Wrongfully Removed As a Beneficiary? Call Us Today!

Are you a beneficiary who has been wrongfully removed from a trust? The experienced attorneys at our law firm can help you seek justice and recover what is rightfully yours.

Being wrongfully removed as a beneficiary of a trust can be a complicated and emotionally charged situation. Founding attorney Paul Deloughery and the rest of our legal team has the knowledge and experience to guide you through the legal process, fighting to protect your rights and ensure that justice is served.

Don’t let this injustice go unanswered. Contact us today at 602-443-4888 to schedule a consultation and let us help you take the first step towards regaining what is rightfully yours. Our team of dedicated attorneys is ready to fight for you.

Call Us If You Have a Question.

Before making any changes to the beneficiaries of a trust, be sure to consult with legal professionals who can provide advice and guidance regarding the specific laws and regulations related to removing or changing a beneficiary. A lawyer can review the terms of the original trust agreement and advise you on whether or not it is legally permissible to remove or change a Beneficiary. This can help ensure that any changes you make are made within the scope of what is legally allowed.

 

ABOUT THE AUTHOR

Founding attorney Paul Deloughery has been an attorney since 1998, became a Certified Family Wealth Advisor. He is also the founder of Sudden Wealth Protection Law.

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