If you set up a trust and appoint a trustee, you expect that the trustee will fulfill the terms of the trust. You expect the trustee to respect the beneficiaries by giving them distributions as you decided in the trust’s language. And in general, that is what happens when you set up an irrevocable trust. When you make a revocable trust (a living trust), you can change terms whenever you like. However, an irrevocable trust does not change without decanting. Let’s look at whether and when a trustee may remove a beneficiary from a trust.

What is an Irrevocable Trust?

With an irrevocable trust, you set up a framework that shields you from ownership of the assets in your trust. Individuals often use this type of trust to qualify for long-term care coverage. An irrevocable trust is not easily changed, especially by a trustee. The trustee has a fiduciary responsibility to the trust beneficiaries to act in their best interests. 

Depending on the terms of your trust, a trustee would not have the power to remove a beneficiary. A trustee may not legally refuse to make distributions to a beneficiary unless the trust document explicitly grants them discretionary powers to do so. A trustee may not make a beneficiary’s inheritance conditional upon meeting specific requirements unless the trust terms put forth the conditions. 

Trust Terms May Allow Removal of a Beneficiary

Many grantors do put conditions on their trusts. If your trust requires meeting a condition to receive distributions, then the trustee must follow your terms. These are often called “incentive trusts.”

For example, let’s say that the terms of the trust include a condition that ends beneficiary benefits if they do not complete college by age 26. If a beneficiary turns 26 without finishing college, they no longer meet your trust conditions. In that case, the trustee may follow your direction and terminate the distributions to a beneficiary who no longer qualifies. 

As the Grantor of your trust, you can set up any terms and conditions for beneficiaries you choose as long as they are legally sound. Conditions could include:

• Illegal gambling convictions mean removal from the trust
• Mandatory completion of an approved drug rehab if convicted of a drug offense
• Finishing a four-year college with a degree
• Getting married before age 45
• Having credit card debt less than $10,000 at all times or disqualified

Some trusts try to limit who a beneficiary can marry or whether they can ever have children. Beneficiaries often sue for personal rights and win. When making conditions on a trust, the legal wording your attorney uses is crucial. If a trustee removes a beneficiary from the trust distribution, the beneficiary may sue in court to overturn the condition. The court will look at your intent and the beneficiary’s rights when making a decision. 

A Revocable Trust Often Transitions into an Irrevocable Trust

Many individuals have a revocable living trust to hold their assets while alive. At their time of death, their pour-over will places the remainder of their assets into the trust. At death, the revocable trust transforms into an irrevocable trust. Then the appointed trustee manages the irrevocable trust to settle the deceased’s estate according to the trust’s terms. This trustee often settles the estate, and the trust is closed. 

If the trust exists for a time, the trustee continues the trust distributions according to the trust’s terms.

Beneficiary Rights

A trustee often is given a level of discretion to decide how to spend the trust funds. The trustee may have a fiduciary duty to invest the funds properly and knowledgeably. Or, a trustee may choose the private schools or colleges that a child shall attend. 

However, trust beneficiaries have the rights implied and written in the trust documents drawn up by the grantor. Some of the beneficiaries rights include:

• Possessing a copy of the trust document
• Annual reports
• Right to receive distributions as stated in the trust documents
• Getting notices to keep them reasonably informed about the trust and its administration, including notices about trust termination, contests, trustee acceptance, and successor trustee appointment
• Ability to petition the court to have the trustee suspended and surcharged
• Rights to pursue a lawsuit for breach of fiduciary duty, 

If a trustee is not keeping the best interests of beneficiaries in mind, a beneficiary may file a petition to force the trustee to make the requested distribution. If this fails, the beneficiary may petition the court to remove the trustee. If a negligent trustee does not handle issues appropriately when brought up by the beneficiary, the beneficiary may seek out an attorney to file a petition to remove the trustee. 

Some trusts name trust protectors as individuals who have the authority to remove a trustee. In these cases, a beneficiary may not need to go to court to have a trustee removed for negligence. 

We Can Help

If you establish a trust or are a beneficiary with questions about a trust, contact us at Vail Gardner Law. We write the legal instruments that create the different types of trusts. Our experience and knowledge in this field give us the ability to direct you into the best type of trust for your financial and personal goals.

Different trusts accomplish different ends, so we thoroughly research your unique situation and personal needs before recommending a trust type. We also work with families who need to decant a trust or who would like to use a revocable living trust to avoid probate. 

Trusts are the ultimate asset protection strategy. We use that strategy to maximize your assets for future generations. Contact us today for a consultation and see how we can help you plan for the future.