Our legal operations continue. We are here for you. Read more

"You're Fired!"...Trustee Accountability: Include The Power To Remove

Want to prevent disaster in your estate? Time to build in some good old-fashioned accountability for the successor Trustee of your California Trust. The best way to hold a Trustee accountable to the beneficiaries is to give the beneficiaries the right to remove and appoint an alternate Trustee.

All too often, standard Trust provisions fail to provide a Trustee removal provision. Instead, if a Trustee is acting badly, the beneficiaries have to spend money out of their pockets to petition the California Probate Court for removal of the Trustee. Worse yet, the Court’s are reluctant to remove a Trustee you appointed under the Trust terms unless there is clear evidence of wrongdoing. By the time evidence of wrongdoing is found, the damage is usually already done. And the bad Trustee can use Trust funds to defend himself until he is removed.

Even if the Trustee is not acting badly, just having relations break down between Trustees and beneficiaries can be damaging to the Trust. Once the relationship is no longer productive, why try to continue it?

The better approach is to give the beneficiaries the power to remove a Trustee. The beneficiaries can then appoint either a successor who is pre-selected by you, or choose from a class of Trustees, such as corporate Trustees, professional Trustees, or individuals who are trustworthy. You can make the power to appoint a Trustee as broad or as narrow as you like. The key is to give the beneficiaries some power over the Trustee so the Trustee has an incentive to behave and respond fairly to the beneficiaries.

It is shocking how many Trusts do NOT provide this type of removal and appointment power. There are many estate-planning attorneys who are against this type of provision. But I have been through many Trust battles in court and I can tell you that a little accountability for the Trustee can go a long way to prevent a Trust lawsuit after you’re gone.