Why would removal of a trustee be necessary?
A trustee is a person or persons intended to manage a trust. The trustee is meant to protect the trust and ensure beneficiaries are informed and included in any disputes arising with or against the trust. (Johnson v. Curley (1927) 83 Cal. App. 627, 630; Alexander v. Title Ins. & Trust Co. (1941) 48 Cal. App. 2d 488, 493–494.)
If a trustee is withholding distributions, not paying the taxes on the trust or otherwise mismanaging the property they are not carrying out their duties as a trustee. If the trustee needs to protect the trust, they may do so in an action without needing to bring in the beneficiaries as a party. (Prob. Code, §§ 16010, 16249.)
Because of this significant amount of responsibility, however, there are also safeguards in place if the trustee needs to be removed. These safeguards are in place to protect the trust property. (Getty v. Getty (1988) 205 Cal. App. 3d 134, 139-140.) If a nonprofit charity corporation is appointed trustee, it may be removed as well, in accordance with the probate code as a guardian or conservator. (Prob. Code, § 15604, subd. (h).)
Who can remove a trustee?
A beneficiary can remove a trustee. If there is more than one beneficiary to the trust because they have a shared interest in having a capable impartial trustee only one beneficiary needs to take action to remove the trustee. (Bowles v. Superior Court of City and County of San Francisco (1955) 44 Cal. 2d 574, 582-583.)
Essentially all beneficiaries are legally considered parties so if an action is taken in court, they do not all need to be specifically included in the action. (Peterson v. Donelley (1939) 33 Cal. App. 2d 133, 136-137.)
A probate court also has express authority to remove a trustee or suspend a trustee’s powers and appoint an interim trustee. (Schwartz v. Labow (2008) 164 Cal. App. 4th 417, 427.) This is often the case where a trustee was spending trust funds without a court order or in some other way counter to his duty to the trust. The court can also prevent a trustee from exercising their power as a trustee if they are trying to use the trust instrument to benefit or pick their own beneficiaries. (Moore v. Bowes (1937) 8 Cal. 2d 162, 166.) A trustee can also be removed by a person “empowered” to do so by the trust. For example, this person could be a co-trustee. (American Center for Education, Inc. v. Cavnar (1978) 80 Cal. App. 3d 476, 497.)
How to successfully bring a removal petition?
The removal petition must be in good faith and in line with the settlor’s intent, otherwise the person bringing the petition will bear the costs. (Cal. Prob. Code § 15642(d).) This means the person bringing the claim must have a legitimate interest. The petitioner must show enough evidence that removal of the trustee is necessary to protect the trust and beneficiaries. This means the trustee may cause continuing or irreversible harm. (Cal. Prob. Code § 16000-16015.) This is because the court and legislature has a purpose to protect trust estates from bad faith claims. (Bruno v. Hopkins (2022) 79 Cal. App. 5th 801, 807.)
What if the petition against the trustee is made in bad faith?
Following the decision in Bruno v. Hopkins, a new interpretation of California Probate Code section 15642(d), allows trustees to hold beneficiaries liable for financial losses the trustee suffers as a result of a bad faith argument. ((2022) 79 Cal. App. 5th 801, 828.) In this case, the court held a bad faith argument is the failure to show financial consequences as a result of the trustee’s actions or attempting to get a trustee removed for illegitimate reasons.
Specifically, in this case, the beneficiary alleged the trust instrument was forged. The court held this was not the case and that the beneficiary brought the petition in bad faith. She lacked credibility or support for her claims and attempt to fabricate a trust document that was more favorable to her. This means if a beneficiary wants to petition for the removal of a trustee, they should ensure they have a legitimate claim with support to show why the trustee poses a risk to the trust.
What is an example?
For example, “Julie” is a trustee for a trust created by “Shawn’s” grandfather. Shawn is a beneficiary of the trust with his two brothers. Julie as the trustee is meant to be a neutral person acting in the interest of protecting the trust.
If Julie starts acting suspicious and seems to be trying to use the money to benefit her heirs or if the is spending money in the trust in unauthorized ways Shawn or any one of his brothers could petition for her removal to the court.
Alternatively, if once Shawn’s grandfather dies his estate went to probate, in the probate court, the court would examine the suspicious behavior by Julie. The court could suspend her as a trustee and appoint an interim one. Otherwise, they could also remove her as a trustee entirely.
Conclusion
A petition for removal of a trustee can be made by a settlor, co-trustee, or beneficiary to protect the trust and its property. The beneficiary or person petitioning may bring this petition to the court to show if the trustee is not removed or suspended the trust risks serious financial harm. However, this petition must be made in good faith with evidentiary support to be considered by the court.
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