Probate lawyers are frequently asked whether a trustee can remove a beneficiary from a trust. The simple and most straightforward answer is no. The only person who can amend the list of beneficiaries is the creator of the trust themselves. However, there are certain situations where this is possible. In this article, we look at when you can remove a beneficiary from a trust. We also explain how to remove a beneficiary from a trust, and whether a beneficiary can remove a trustee.
What Are the Trustee and the Beneficiary of a Trust?
Before we get started on whether a trustee can remove a beneficiary from a trust, it is important to understand these two roles in more detail. There is some overlap, but the power each party has over the property and assets is distinct. To ensure all know what we are talking about, here are the legal definitions of each and how they are related to the trust in question.
· Trustee Definition: The person or persons designated by the grantor, the person who establishes the trust, to hold and manage the property within it. In the case of a revocable trust, the grantor may take on this administration role for themselves. In other cases, the grantor may appoint a trustee to manage the property even while they are alive. Trust documents will also name a successor trustee. The successor trustee will take on this role once the trustee passes away or becomes otherwise incapable of completing their duties.
To ensure a flawless process, a grantor of trust should also have a well-structured will in a written form. Will Template helps to make sure that the important details are not missed while forming the document.
· Beneficiary Definition: The person for whom the trust was established and who will receive all or a portion of the property following the grantor’s death. This is usually close friends or relatives of the grantor or a charitable organization. In most trusts, there will be multiple beneficiaries named in the document. Note that the trustee can also be one of the beneficiaries.
Powers of a Trustee
As the person responsible for managing and administering the trust, a trustee has many powers. This ensures that they can do their job and deal with trust matters effectively. Below is a list of the common statutory powers a trustee will have over the trust. However, the grantor can explicitly forbid any of the following powers in the trust document. If no exclusions apply, the trustee legally has all of the following rights:
- The power to insure the trust property.
- The power to make reasonable repairs to the trust property.
- The power to sell trust assets and property.
- The power to invest to create income and/or capital growth.
- The power to pay bills and expenses with trust funds.
- The power to make payments to the named beneficiaries.
In some instances, the trustee will also be given the power of appointment. This power means they can amend the terms of the legal document. However, this does not give the trustee the right to remove a beneficiary from the trust. Nevertheless, they can alter the distribution of assets between beneficiaries and hand them out as they see fit.
Can a Trustee Remove a Beneficiary From a Revocable Trust?
In most situations, the trustee cannot remove the beneficiary from a trust. Even those with the power of appointment can only alter the distributions. However, this is not always the case, the beneficiary can always be removed if it is a revocable trust. A revocable trust is one that is in place while the grantor is still alive. In the US, it is also referred to as a living trust or a living will. This type of trust is inherently flexible. As the grantor is still alive, they can change the terms and trust provisions as they wish. This includes removing beneficiaries or terminating the trust entirely.
However, it is only possible to remove the beneficiary from the trust when the grantor is still alive. Once they pass away or otherwise become incapable of managing the property, the revocable trust automatically becomes irrevocable. At this point, it is up to the successor trustee to manage the assets, as per the grantor’s wishes. This means they cannot remove or add any beneficiaries nor make any other modification.
Can a Beneficiary Remove a Trustee From a Trust?
How about if the shoe is on the other foot? Can a beneficiary remove a trustee? The answer is yes. However, the beneficiaries need to have good reason to remove the trustee and contest the trust in court. In most cases, this requires proof that the trustee has not been acting with the grantor’s best interests at heart. In other cases, a change of trustee will be permitted if they become incapacitated. To understand better, here are examples of situations that are legal grounds for a trustee to be removed:
- The trustee fails to follow the terms of the trust document.
- The trustee passes away or becomes mentally incapacitated.
- The trustee fails to undertake any of their legal obligations.
- There is a conflict of interest between the trustee and trust property.
- The trustee is acting in a biased way towards the beneficiaries.
How do I remove a beneficiary from a trust?
To remove a beneficiary from a trust, the trustee needs to submit a trust amendment form. This allows the trustee of a revocable trust to make changes to the original document while keeping it active. If the trust is jointly owned, both the trustees must agree to any amendments made.
Can a trustee change the beneficiaries of a trust?
If the trust in question is a living trust where the trustee is the grantor, they can change the beneficiaries by amending the trust deed. However, the beneficiaries of an irrevocable trust cannot be removed. The role of the successor trustee is to carry out the wishes of the grantor, even if that means handing the property to the named beneficiaries.
Who has more right, a trustee or the beneficiary?
In terms of property management and administration, a trustee has more rights than a beneficiary. However, the trustee has no right to remove a beneficiary unless the grantor is in charge of the trust. On the other hand, the beneficiaries can remove the trustee through a court order.