When a California resident establishes a trust as part of an estate plan, that person (called the “settlor”) usually makes a substantial effort to find the right person to name as trustee. Potential settlors look at a person’s financial experience, knowledge of legal matters, and most importantly, general reputation for trustworthiness.
Despite these efforts, a named trustee may turn out to lack the ability to manage financial matters, or lack the judgment to make wise investments or, perhaps most common of all, is unable to resist the temptation of easy money that can be made by ignoring the provisions of the trust and dipping into the trust assets for personal gain. What can be done if the trustee is mishandling the trust assets? California statutes provide an answer.
Beginning the removal process
Some trusts provide a procedure for removing the trustee, but some trustees may refuse to abide by such a provision. A court can act on its own motion, but the more likely procedure begins with a motion filed by a settlor, a co-trustee or a beneficiary. The person seeking removal must prove one of the following by a preponderance of the evidence:
- The trustee has violated a breach of the trust instrument
- The trustee is unfit to be a trustee
- Hostility or lack of cooperation between co-trustees
- The trustee has taken excessive compensation for their work on the trust
- The trustee has failed to take action to preserve trust assets or to maximize trust income
- The trustee is unable to carry out their duties
- The trustee is unable to resist committing fraud or exercising undue influence
- For other good cause
Interim action by the court
The court can also suspend the trustee’s powers or transfer trust assets to a co-trustee or receiver in some cases. If the court finds that the motion for removal was filed in bad faith, or if removal of the trustee would be contrary to the settlor’s intent, the court may order the party seeking removal to pay all or part of the trustee’s legal fees.
The evidentiary bar for removal of a trustee is very high, and such motions are rarely granted. Any person considering filing such a motion may benefit from reviewing the substance of the motion with an experienced probate attorney.