How to Remove a Trustee

How to Remove a Trustee

Are you currently a beneficiary or an appointor of a trust that you feel is not being properly managed by your trustee? Depending on the circumstances, you may have reasonable grounds to remove the trustee through several methods. 

Contrastingly, if you’re a trustee, it’s crucial to know your rights, powers and responsibilities when administering a trust to avoid being removed as a trustee. 

In this article, we’ll explain how to remove a trustee from a trust, reasons trustees should be removed from a trust, grounds for removing a trustee, and answers to other frequently asked questions.

Read along!

Table of Contents

What are the reasons you would want to remove your trustee?

Beneficiaries or appointees may seek the court’s approval for the removal of trustees for a variety of reasons. These include the following

  1. A trustee is unfit for office
  2. They conduct activities that are harmful to the trust
  3. If the trustee is confused in regards to their duties as a trustee
  4. If the trustee misunderstands their duties as a trustee
  5. If the trustee disappears or can’t be contacted for a large amount of time
  6. If the trustee has entered financial insolvency, for example, if they have become bankrupt
  7. If they act hostile towards the beneficiaries
  8. If they are failing to comply with the terms of the trust deed
  9. If there has been a breach of trust by the trustee
  10. Where the trust assets are not being appropriately invested by the trustee 
  11. Where there is a conflict of interest due to the trustee is misusing the trust for their own personal gain 
  12. Where the trustee’s mental incapacity prevents them from managing the trust
  13. If removing the trustee is required to protect beneficiaries’ interests or trust assets 
  14. Where the trustee has an unresolvable disagreement with their co-trustees 
  15. If the trustee has failed to manage the trust properly, whether this is on purpose or through negligence
  16. If the trustee has acted against instructions outlined in the trust document
  17. If the trustee has breached their fiduciary duties
  18. If the trustee has not acted in the best interests of the beneficiaries

If the court finds any of these reasons to be satisfactory, the trustee may be removed. If the court finds that there’s only friction between the trustee and beneficiaries or there has only been a disagreement, the court will find that these aren’t satisfactory grounds for the removal of a trustee. 

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How to Remove a Trustee: Two Key Steps

If you want to remove a trustee, then you will need to follow the following steps as an appointor or beneficiary.

Step 1. Look to the trust instrument/ trust deed

Firstly, you must look at your trust deed. A trust deed is a document that outlines how a trust is managed. It also outlines how the trust can be modified. Therefore, it would specify whether a trustee can be modified and the steps that must be followed to remove them from a trust.

You must see if your trust instrument has an express term outlining the power to remove the trustee and appoint a new one. If your trust instrument does have this power, then this power is valid and enforced. 

This power is a fiduciary duty, which means that the power must be used in good faith and confer a benefit to all beneficiaries of the trust. This was highlighted in the 2010 Supreme Court of NSW Decision Hillcrest (Ilford) Pty Ltd v Kingsford (Ilford) Pty Ltd.

Alternatively, if there is an express power in the deed that allows appointors and beneficiaries to remove and appoint a new trustee, the term will also apply.  The express power could outline the reasons a trustee can be removed and the method that must be followed. You should be aware that appointors can act for their own benefit and not necessarily 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 appointor to remove a trustee. You can seek to have a trustee removed by court. This is because courts have the power to remove trustees due to their inherent and statutory jurisdiction. 

Each State and Territory in Australia has its own Trustee Act, an example being the Trustee Act 1925 (NSW), which outlines that a beneficiary can approach the court to intervene in their trust and appoint a new trustee to replace the old one. Courts must consider removing a trustee due to the responsibilities they have. 

These responsibilities are to protect the welfare and interests of the beneficiaries and to determine whether the removal of the trustee would lead to a due and proper administration of the trust.

Courts are primarily given the power to remove trustees when removing them without the assistance of the court is difficult or impractical. Some considerations courts make when determining whether they should remove a trustee include the following:

  • Whether removing the trustee will protect beneficiaries’ interests
  • They will consider if the trustee failed to fulfil their duties pursuant to the trust deed
  • Whether the trustee has acted improperly

It’s important to note that courts can choose to remove a trustee even if they have not done anything wrong if removing the trustee would eliminate a conflict they have with a beneficiary or another trustee.

What elements do you need to prove to a court to remove a trustee?

To satisfy a court that they should remove a trustee, you’ll generally be required to demonstrate one of the following:

  • It is necessary to remove the trustee in order to protect beneficiaries and trust assets 
  • Trust deed obligations are not being met by the trustee you want to remove
  • That the trust’s beneficiaries are being harmed by the way the trustee exercises their power

How can beneficiaries remove a trustee?

A trust deed allows beneficiaries to remove trustees if there is a valid reason for doing so. For the trustee to be removed, there needs to be a majority vote among the beneficiaries. Sometimes, when beneficiaries are trying to get a trustee removed from the trust, they might be required to file a petition for removal.

How can trustees remove each other?

Generally, trustees may want to remove each other where there is a significant conflict between them. Trustees can ask the appointor of the trust to have their co-trustee removed. If the trust no longer has an appointor, the trustee can seek assistance from beneficiaries to have the trustee removed. 

Trustees can remove each other through a court, or they can file a petition for removal to have their co-trustee removed. 

Conclusion

If you’re a beneficiary or an appointor wanting to remove a trustee, you should first refer to the trust deed to see if there are any express powers that will allow you to remove a trustee and the grounds for removal. If that doesn’t work, you may need to seek court approval and explain how the trustee’s actions are detrimental to the trust.
If you’re still unsure about how to remove a trustee, you should hire a lawyer for legal advice. Contrastingly, if you’re a trustee and want to receive legal advice as to how to avoid being removed as a trustee, you should also hire a lawyer.

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