Many New Yorkers use trusts as vital parts of their estate plan. And of course, each trust requires the appointment of a trustee. What happens if the person who makes the trust (the “settlor”) makes a vital mistake in managing the trust? Can the trustee be removed? Yes, but the process can occasionally be laborious and laden with conflict.
The basics of trustee removal
New York law prescribes various methods and reasons for removing a trustee. While most judicial proceedings require that a party who wants the court to take some action, trustees can be removed in certain cases without the commencement of a legal action or the service of a summons. These cases include:
- The failure of a fiduciary to appear in court and provide information requested by the court
- If the fiduciary has left the state to prevent service of process
- Refusing to obey an order from the court to provide specified information
- When the will or other lifetime instrument has been ruled to be invalid
- Failure to file the required bond
- Conviction of a felony or declared incompetent
- Mingles funds belonging to the trust with other funds
- When other events occur that may prompt the court to discharge the trustee
A trustee may also be removed for failing to provide an accounting to the court after being ordered to do so.
According to a number of rulings by New York appellate courts, a judge may summarily dismiss a fiduciary if it finds by undisputed evidence that the fiduciary has violated his duty of trust to the trust beneficiaries. Most of these cases involve the willful mishandling of trust assets to the detriment of the trust beneficiaries.
Removing a trustee for cause after service of process
The cases involving removal of a trustee after service of process providing notice of alleged error or breaches of fiduciary duty involve repeated violations of the trustee’s violation of his or her fiduciary duty. These violations cover a variety of acts or omissions by a trustee that are grounds for removal; the list is long and varied and includes:
- The trustee was or became ineligible
- The trustee improvidently managed or injured trust property
- The trustee willfully refused or without good cause neglected to obey an order of the court
- The trustee’s appointment has ceased due to the provision of the trust instrument
- The trustee removed trust property out of the state without the Court’s permission
Many other reasons exist for the removal of a trustee. Anyone considering taking such action should consult an experienced estate attorney for advice on how to proceed.