Are you currently a beneficiary or an appointer of a trust that you feel is not being properly carried out by your trustee? Depending on the circumstances, you may have reasonable grounds to remove the trustee through a few courses of action explained below.
If you are a trustee, it is important to know your rights, powers and responsibilities when administering a trust so you do not get removed. For all parties to a trust, including the trustee, beneficiary or appointer, it is recommended to seek advice from a trust lawyer. Our network of lawyers includes experienced trust lawyers that operate on a fixed-fee basis.
How to Remove a Trustee
Step 1. Look to the trust instrument
If you have a trust instrument that has an express term outlining a power to remove the trustee and appoint a new one, then this may be valid and enforced. This power is a fiduciary duty, that means the power must be used in good faith and confer a benefit to all beneficiaries of the trust, highlighted in a Supreme Court of NSW decision in 2010.
Alternatively, if there is an express power in the deed to allow appointers to remove and appoint a new trustee, this term will also be valid. It’s worth noting that the appointer can act in their own benefit and not necessary in the best interest of the trust.
Step 2. Seek removal through the Court
If your trust instrument does not expressly state any powers for a beneficiary or an appointer, only the court has power to remove a trustee due to their inherent and statutory jurisdiction. Each State and Territory in Australia has a corresponding Trustee Act, an example being the Trustee Act 1925 (NSW), which outlines that a beneficiary can approach the court to intervene and appoint a new trustee in substitution for the old one. This is because the court has the responsibility to protect the welfare and interests of the beneficiaries, and to determine whether removal of the trustee would lead to a due and proper administration of the trust.
Reasons as to why you would want to remove your trustee.
There are many reasons why a beneficiary or an appointer would want to seek a court’s approval for the removal of a trustee. These include but are not limited to situations such as:
- A trustee is unfit for office;
- They conduct activities that are inimical to the trust;
- If they are confused or fundamentally misunderstand their duties as trustee;
- If they disappear and unable to be contacted;
- If they become bankrupt; or
- If they are hostile towards the beneficiaries.
If any of these reasons satisfy the court, a removal of the trustee may result from the hearing. If there is only friction between the trustee and beneficiaries, or there has been a disagreement, this won’t be satisfactory grounds for removal.
If you are a beneficiary or an appointer and are seeking to remove a trustee, first refer to the trust instrument and determine if there is any express powers allowing you to remove a trustee and under what circumstances. Failing that, you may need to seek court approval and outline how the trustee is being prejudicial to the trust.
If you are in a situation where the trust is not being properly administered by your trustee, it is important to seek advice from a trust lawyer.
Need legal guidance with removing a trustee? Contact a LawPath consultant on 1800 LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.