A trustee can be removed from a trust for any number of reasons. In some cases, it may be necessary to change the terms of the trust or even to halt operations until a new trustee is appointed. This guide will explain how a trustee can be removed and the steps involved in doing so.
Check the Terms of the Trust Document.
The trust document will outline any limitations on the powers held by the trustees or a third-party when it comes to making changes to the trust and who has the authority to act. This can include spelling out how a trustee can be removed and replaced with a new trustee. If explicit instructions aren’t given, you may need to gain permission from either a court or another trustee before making any significant changes like removal of a trustee.
Be Careful Not to Violate a No Contest Clause in the Trust or Will!
One of the first and most important steps when considering removing a trustee from a trust is to make sure you are not in violation of any no contest clauses that may be included in the trust or will. A no contest clause states that an interested person such as a family member cannot challenge or object to certain provisions in the trust or will without risking forfeiture of their beneficiary interests. The trustee could claim that you are violating the no contest clause by seeking to remove them. So before proceeding, make sure that taking action won’t violate any no contest clause in the trust and put your inheritance at risk.
Determine Who Will Replace the Trustee
Before you can remove the trustee, it’s important to determine how you will replace him. This should be done before the outgoing trustee is formally removed. This will ensure that your trust won’t lack necessary oversight during any transition period and the trust assets are handled appropriately. Depending on your trust agreement, you may need to appoint a specific individual or court permission may be necessary in order to name a new trustee.
Follow Procedure Outlined by the Trust Document or applicable State Statutes.
The documents that create the trust probably dictate how a trustee can be removed. Generally, there are two ways to remove a trustee from a trusts: one agreed upon by all beneficiaries named in the document or by court order. Usually, if all parties agree on the removal of the trustee, this allows for an efficient and quick transaction. However, if some parties do not agree with the removal it may require going through court proceedings to have an official decision made. There might also be a Trust Protector who has authority to remove and replace a trustee.
Who May Remove a Trustee Under Arizona Law?
According to A.R.S. Section 14-10706 , “The settlor, a cotrustee or a beneficiary may request the court to remove a trustee or a trustee may be removed by the court on its own initiative.”
Also, under Arizona state law, a trustee may be removed upon the unanimous consent of all trust beneficiaries. If all beneficiaries are not capable of providing this consent due to age or incapacity, court intervention may be required in order for the removal process to take place. The court may remove a trustee if it finds that the trustee is unwilling or unable to act, has committed malfeasance, or is otherwise not acting in the best interests of trust beneficiaries. (We discuss the court’s ability to remove a trustee below.)
What Are the Standards for Removal of a Trustee in Arizona?
A.R.S. Section 14-10706 outlines the circumstances under which a court can remove a trustee in Arizona. According to the statute, a court can remove a trustee if:
- The trustee has committed a serious breach of trust;
- The trustee is insolvent or has been judicially declared incompetent;
- The trustee has been convicted of a felony or a crime involving moral turpitude;
- The trustee has become incapable of performing the duties of the office due to physical or mental incapacity;
- The trustee has continuously failed to perform the duties of the office, and the failure has not been remedied after being requested to do so by the beneficiaries or co-trustees;
- The trustee’s removal is requested by all of the beneficiaries, and the court finds that removal would not be inconsistent with a material purpose of the trust; or
- The court finds other cause for removal.
Overall, the statute provides a clear framework for determining when a court can remove a trustee in Arizona, with a focus on protecting the interests of the beneficiaries and ensuring the proper administration of the trust.
What is a Serious Breach of Trust?
A breach of trust, also known as a breach of a trustee’s fiduciary duties, refers to a situation where a trustee fails to perform his or her duties in accordance with the terms of the trust instrument or applicable law, resulting in harm to the trust beneficiaries. Some examples of a breach of trust include:
- Self-dealing: when a trustee engages in transactions that benefit themselves or their family members at the expense of the trust beneficiaries.
- Failure to diversify investments: when a trustee fails to diversify trust investments, resulting in losses to the trust beneficiaries.
- Mismanagement of assets: when a trustee fails to properly manage or protect trust assets, resulting in losses to the trust beneficiaries.
- Failure to distribute trust assets: when a trustee fails to distribute trust assets to the beneficiaries as required by the trust instrument or applicable law.
- Conflicts of interest: when a trustee places their personal interests above those of the trust beneficiaries or acts in a manner that is inconsistent with the terms of the trust.
How long does it take to remove a trustee?
How long it takes to remove a trustee depends on whether you need to get the court involved. Here are some rough estimates:
Removal Under Terms of Trust.
Sometimes the trust will spell out how a trustee may be removed. For example, the trust might say that all beneficiaries can consent to remove a trustee. Then the length of time just depends on how long it takes to get everyone to agree and sign the documentation.
Removal by Trust Protector.
If the trust names a Trust Protector, that person can remove and replace the trustee. This can usually happen within a matter of weeks.
Removal by the court.
If you have to go to court, it can take significantly longer. In Arizona, even if the trustee does not object, it will take a minimum of 6 to 8 weeks. If the trustee fights your efforts to remove him or her, then it can take months and even years.
There are ways to speed up the process of protecting the trust property and your rights as a beneficiary. See the section below.
What Can the Court do in the Meanwhile?
Sometimes you need to take immediate action to protect the trust assets or your interests as a beneficiary. However, this can be frustrating because it can take months and sometimes years to get the court to actually remove a trustee. If a court determines that a trustee has mismanaged trust assets, it may take certain actions to protect the assets prior to removing the trustee. Some of the actions a court may take include:
Appoint a special trustee:
The court may appoint a special trustee to manage the trust assets temporarily until a permanent trustee is appointed. This can help prevent further mismanagement of the assets while the removal process is ongoing.
Compel the trustee to perform the trustee’s duties:
A court can order the trustee to take certain specific actions. While this might seem tedious, it actually helps build the case against the trustee if the trustee fails to take even those court-ordered actions. And even if the trustee follows the court order, it really annoys the probate judge to have to micro-manage someone else’s job.
Compel the trustee to correct a breach of trust:
The court can order the trustee to pay money back, restore property to its prior condition, or take other actions.
The court may freeze the trust assets to prevent the trustee from making any further transactions or transfers that could harm the trust or its beneficiaries.
Order an accounting:
The court may order the trustee to provide a detailed accounting of all trust assets and transactions. This can help determine if any mismanagement or improper conduct has occurred.
Remove the trustee’s control:
The court may limit or remove the trustee’s control over the trust assets, such as by appointing a co-trustee or requiring the trustee to seek court approval before making any further transactions.
The court may order the trustee to return any misappropriated or mismanaged trust assets to the trust.
Reduce or deny compensation to the trustee:
We’ve seen this repeatedly, especially in the case of a licensed fiduciary with a reputation for charging too much. The court will order that no trustee fees or expenses be paid without a court order.
Overall, the court has a range of options available to protect trust assets prior to removing a trustee for mismanagement or other breaches of fiduciary duty. The goal is to ensure that the trust assets are properly managed and protected for the benefit of the trust beneficiaries.
A Trust Litigation Attorney Can Tell You How a Trustee Can Be Removed.
If you have questions or difficulties when attempting to remove a trustee, you should seek professional advice of a trust litigation attorney. Trust law can be complex and there are laws which could potentially limit the ways in which one can remove a trustee from a trust. Consulting with a lawyer or other legal expert may help to ensure that you take all of the appropriate steps in removing the trustee from the trust and that all necessary documents are filled out correctly.
Contact Our Experienced Arizona Trust Attorneys if you have any questions about how a trustee can be removed!
If you have reason to believe that a trustee has committed a breach of trust, it is crucial to take action to protect the interests of the trust beneficiaries. A trustee who fails to fulfill their fiduciary duties can cause significant harm to the trust and its beneficiaries, and may even be engaging in fraudulent or criminal conduct.
Our law firm has extensive experience helping clients navigate the complex process of removing a trustee. Our skilled attorneys understand the intricacies of trust law and can provide the guidance and advocacy you need to achieve a successful outcome. We will guide you through the entire process and tell you how a trustee can be removed in your situation.
If you believe that a trustee has committed a breach of trust, don’t wait to take action. Call us today at 602-443-4888 to schedule a consultation and learn more about your legal options. We are committed to protecting your interests and helping you achieve the best possible outcome in your case.