A trust is a common form of an estate plan where assets are placed into a trust to be managed by a trustee and/or later distributed by the trustee to the beneficiaries. A trustee is a fiduciary and owes fiduciary duties to the beneficiaries. Usually, a trustee takes their role seriously and acts in the best interests of the trust plan and the beneficiaries. But there are trustees who fail to act in the best interest of the beneficiaries, and even act in their own self-interest.
Over the last few years, we at Chenoweth Law Group have received an increasing number of complaints regarding misbehaving trustees. These complaints range from a trustee’s inaction in administering the trust and distributing its assets to the heirs/beneficiaries, to outright theft. This post addresses removal of a trustee. Beneficiaries who learn a fiduciary is not meeting his or her obligations may take action to remove the trustee.
To remove a trustee, the parties must meet certain conditions. First, the party requesting removal must have the authority to do so. Depending on the type of trust, the settlor, co-trustees or beneficiaries may be able to remove a trustee. They must also have an acceptable reason for removal.
Reasons for Removal
In accordance with Oregon law, some of the reasons for removing a trustee include:
- Persistent mismanagement of trust assets
- Prioritizing self-interest when making decisions
- The trustee is unfit or unwilling to administer the trust
- Co-trustees cannot cooperate, adversely affecting proper administration of the trust
- The trustee has engaged in self-dealing or misappropriation of funds
- The trustee fails to produce an adequate accounting of trust activity
- The trustee delays or fails to make distributions to the beneficiaries
In other words, removal efforts can be successful if a trustee has breached its duty of loyalty or is ineffectual in carrying out the trust pursuant to its terms. If a party simply disagrees with the trustee’s decisions or actions, removal may not be warranted if the trustee is otherwise fulfilling his or her fiduciary duty.
Obstacles to Removal
In some cases, proving these or other bad acts occurred is difficult and expensive. There may also be personal relationships between co-trustees or beneficiaries, adding an emotional element that can cloud judgment and expectations. Getting legal counsel for guidance is important, and it should occur early on when you suspect problems.
The Removal Process
The trust agreement should direct parties on the process for removing a trustee. This could include a provision, for example, that the majority of beneficiaries must vote in favor of removal. However, in some cases, parties may need to file a petition with the court and submit evidence.
In a judicial proceeding involving the administration of a trust in Oregon, the court has discretion to award attorney’s fees to any party. Attorney’s fees may be paid by another party, or in some cases from the trust.
Removing a trustee can disrupt the administration process, strain relationships, and cost money that may come from the trust. However, it may nonetheless be essential to ensure proper administration of the trust.