While wills have their merit, many of the assets in a will are still subject to probate, which is often a lengthy and expensive process.
Probate is the official process the court uses to distribute someone’s assets after they pass, and it’s generally best to have as few assets go through probate as possible — that way beneficiaries and heirs get their inheritance faster.
Avoiding probate is where certain trusts can be of help.
But once a trust is established, understanding who has what rights, responsibilities, and powers can get tricky. Beneficiaries and trustees can butt heads, and knowing more nuanced answers to questions like whether or not trustees can remove beneficiaries is incredibly useful.
Key Takeaways:
- Trustees have a fiduciary responsibility to the trust and beneficiaries, meaning they have to follow the terms of the trust and act in the best interests of the beneficiaries.
- A trustee can only remove a beneficiary in a revocable trust, but that’s when the person who made the trust is the person making changes.
- A beneficiary cannot be removed from an irrevocable trust by the trustee, but a beneficiary can exit the trust if approved by the other beneficiaries.
- Beneficiaries can file to remove a trustee if they feel like they are breaching their fiduciary duty.
- You can be both the trustee and the beneficiary at the same time.
Note: This is generalized advice and does not address specific state and/or local laws that may affect the assumptions found here. This should also not be considered explicit legal advice, and please hire a lawyer if you have a lot at stake here!
Trust Terms You Need to Know
Before we get into the deep side of trust powers, let’s make sure we understand a few key terms.
- Trusts - a financial instrument that allows families and individuals to designate who gets what after someone passes and bypass probate or reduce tax burdens
- Revocable Trusts - trusts that can be changed or revoked because the person who made them is still alive / has chosen to keep the trust as revocable
- Irrevocable Trusts - revocable trusts become irrevocable when the person who created it dies, but you can also create irrevocable trusts while you are alive
- Trustor - the person who creates the trust
- Grantor/Settlor - simply another word for trustor
- Beneficiaries - the recipients of assets in a trust, will, or life insurance policy— whether current beneficiaries or remainderman
If you need a bit more clarity on the basics of trusts, check out our Guide to understanding trusts.
Can a Trustee Remove a Beneficiary From a Trust?
The short answer? Usually not.
Trustees have certain powers, which are usually granted under the trust agreement, by state statute, or under common law. The trustee’s powers relate to their three main functions: investment, distributions, and administration of the trust.
And because they have a fiduciary duty to carry out the terms of the trust, the trustee’s powers do not necessarily include the authority to remove a beneficiary, unless the trustee is also the trustor AND the will is revocable, which at that point just means the person who is creating the trust has the power to mix and match beneficiaries as they see fit because… well they are building their own trust — OR:
The trustor gave the trustee “appointment of authority”
This is an explicit provision in the trust that gives the trustee the right to make changes to who gets what. Think of a spouse or partner who passed away, and they want to make sure their spouse can do as they see fit with the trust. In this situation, then yes, a trustee could change the beneficiaries, at least according to the language defined in the trust.
The court makes changes
While a trustee does not have the power to remove a beneficiary directly, the court does have the authority to remove a trust beneficiary or alter trust terms if it has legal basis to do so, such as with cases of undue influence or lack of capacity by the trustor to create the trust.
A beneficiary removes themselves
Sometimes a beneficiary will refuse to accept the benefits of the trust. In these situations, a beneficiary can ask to be removed from the trust, but the other beneficiaries have to agree to this change.
Bottom Line:
It all goes back to the powers granted in the trust to the trustee, but in general once someone has passed the beneficiaries are locked in, excluding extenuating circumstances.
Other Common Questions
How do I remove a beneficiary from a trust?
Before a living trust vests (initiates), whether that be the death of the trustee or some event that triggers the legal activation of the trust, a trustor can remove a beneficiary of the trust.
A revocable trust enables a trustor to change the terms of the trust, including the beneficiary.
In order to make changes to your trust, you’ll need to fill out a trust amendment form. It also depends on how you set up the trust. For example, if you have a joint trust, your spouse or partner must also agree to the change.
These amendment documents can be quite simple, and often come in the form of creating a Trust Amendment, or full Amendment & Restated version of the original trust terms.
Either way, any changes will need to have the date, relevant signatures, and officially state that it is an amendment.
If you are a trustee with power of appointment, you may have the power to remove a beneficiary due to the terms of the trust granting you that authority. The trustee can change the terms of the trust document. However, the trustee must be explicitly granted these powers by the trustor in the trust agreement. The type of trust will change whether a trustee can remove a beneficiary or not.
Also, if your trust is irrevocable, then no amendments or modifications can be made with explicit permission of the beneficiaries (excluding state-specific exceptions and court-mandated alterations).
Can you change beneficiaries in a trust?
It depends. If the trust is a revocable trust, a trustor can change the beneficiary of the trust. However, with irrevocable trusts, they cannot normally be changed or amended easily. Like with many aspects of the law, there are some exceptions.
Once an irrevocable trust is created by the trustor, it can be difficult to change beneficiaries. Yet, a trustor can ask the trustee to petition the court to change beneficiaries. In recent years, some states have begun allowing certain changes to an irrevocable trust— a process which is often referred to as decanting. If the trust has not been created yet, a beneficiary can be changed. Lastly, a trustor can terminate the trust altogether by defunding the trust in order to remove the beneficiary.
Who has more rights? The trustee or beneficiary?
Normally the beneficiary. Afterall, that's who the assets held in trust are designed to benefit.
A trustee has a fiduciary duty to uphold the terms of the trust and has certain rights over the trust. So if a beneficiary is supposed to get something according to the trust, it’s the trustee’s job to make sure that happens.
Note: A trustee can also be a beneficiary of the trust, but still must maintain their fiduciary duties to the trust. This includes avoiding any situations that involve a conflict of interest.
Can a beneficiary can challenge a trustee?
If the trustee is not acting properly, beneficiaries can take them to probate court and claim breach of fiduciary duty, along with other legal claims. They can also contest the trust if some suspected foul play occurred.
Beneficiaries, though, must show reasonableness in their requests to the trustee. A beneficiary can override the trustee’s authority with legal means, such as with a court order through litigation, but cannot usually effect the replacement of a trustee due to a poor working relationship or discontent with a trustee's decisions.
Remember: as with most laws, the specifics are everything
Again, keep in mind that this guide is intended as generalized advice.
For instance, some states do allow you to modify irrevocable trusts in specific situations. In other situations, some trustees can get around irrevocable trusts by transferring the assets into new trusts. Issues of an "Inability to administer trusts" can also come into play. Not to mention, in certain situations a trusts itself can be dismantled if it is deemed illegal.
After all, Trust & Estate law is it's own entire branch within our legal system! So if you have a real issue to tackle apart from modifying your own revocable trust, it might be a good decision to consult a trust & estate attorney in your area. In fact, doing so may be the only way you’ll be able to navigate your unique situation with confidence.
Good luck!