How trustee removal, resignation and succession work

By Richard C. Wilson.

Start with the trust instrument, the proposed departure and the proposed successor. Gather notices, appointment documents and property records before your adviser meeting.

Research notice: State examples address their identified jurisdictions. Ask an estate attorney to confirm the applicable law, trust provisions, notice recipients, appointment authority and transition documents before acting.

Resignation involves notice or court approval

In South Carolina and Utah, a trustee may resign on at least 30 days' notice to qualified beneficiaries, the settlor if living, and all cotrustees. South Carolina expressly requires written notice. Either state also permits resignation with court approval.

When approving resignation, the court may issue orders and impose conditions reasonably necessary to protect trust property. Resignation does not discharge or affect liability of the trustee or bond sureties for the trustee's acts or omissions. Other states differ.

For a resignation discussion, gather the proposed notice, recipient list and any proposed court order. Ask counsel to review the departure and the property handoff together.

Vacancies and successor appointments have separate conditions

Virginia: vacancy and appointment priority

In Virginia, a vacancy need not be filled while a cotrustee remains. A vacancy must be filled when no trustee remains.

A required appointment for a noncharitable trust follows this priority:

1. A successor designated under the trust's terms.
2. A person appointed by unanimous agreement of the qualified beneficiaries.
3. A court appointee under §§64.2-1405 and 64.2-1406, or §64.2-712.

A required appointment for a charitable trust follows this priority:

1. A successor designated under the trust's terms.
2. A person selected by charitable organizations expressly designated to receive trust distributions. Attorney General concurrence is required if the Attorney General previously requested consultation from such an organization regarding successor selection.
3. A court appointee under §§64.2-1405 and 64.2-1406, or §64.2-712.

A successor or surviving trustee receives the original trustee's rights, powers and privileges, together with the original duties, liabilities and responsibilities. Discretionary powers conferred by the instrument do not change that rule. Exceptions apply if the instrument expressly provides otherwise or the successor's appointment order provides otherwise. Other states differ.

Utah: vacancy and appointment priority

In Utah, a vacancy need not be filled while a cotrustee remains but must be filled if none remains. Appointment of a guardian or conservator for an individual trustee creates a vacancy unless the trust provides otherwise.

Required appointments follow instrument designation, unanimous qualified beneficiary agreement, then court appointment. Required charitable appointments instead follow instrument designation, selection by expressly designated charitable distributees with Attorney General concurrence, then court appointment. Other states differ.

Washington: designated successor notice

In Washington, the notice rule below applies when a vacancy exists and a willing successor is named in the instrument or selected under its procedure.

The outgoing trustee or another interested party must notify each permissible distributee of the vacancy and the successor's agreement to serve. The successor is entitled to act except for good cause or disqualification. Acceptance is deemed to occur on the predecessor's effective discharge under RCW 11.98.041. Other states differ.

Ask Washington counsel to review the predecessor's discharge procedure separately. Bring the successor designation, selection records and proposed distributee notice to that discussion.

Minnesota: accepting or declining the appointment

In Minnesota, for example, a designee accepts by substantially complying with the instrument's acceptance method. If no method is provided or the method is not expressly exclusive, acceptance can occur through accepting property, exercising trustee powers, performing trustee duties or otherwise indicating acceptance.

A designee who has not accepted may reject the trusteeship. Failure to accept within a reasonable time after learning of the designation is deemed rejection, with that period capped at 120 days.

A designee may inspect or investigate trust property without accepting office. Preservation of property without acceptance requires sending a rejection within a reasonable time after acting. The rejection goes to the settlor or, if the settlor is dead or lacks capacity, a qualified beneficiary. Other states differ.

Minnesota: bond and certificate questions

In Minnesota, for example, bond is required only if the court finds it necessary to protect beneficiaries or the instrument requires it and the court has not dispensed with that requirement.

The court may specify the amount, liabilities and need for sureties, and may modify or terminate the bond. A regulated financial service institution qualified to conduct trust business in Minnesota need not give bond even if the instrument requires it. Other states differ.

In Minnesota, for example, a settlor or trustee may execute a certificate containing fewer than all trust provisions after execution or creation of the trust. The certificate must include:

• The trust's name, if any, and the instrument date.
• The name and address of each trustee empowered to act when the certificate is executed.
• Either the statutory property powers statement with limitations or information about powers relevant to the certificate's purpose.
• The number of trustees required to act.
• A statement about whether the trust has terminated or the instrument has been revoked.

The statutory statement addresses authority to sell, convey, pledge, mortgage, lease or transfer title to interests in real or personal property. Any limitations must be stated, or their absence indicated.

The settlor or trustee must represent that the certificate's statements are true and correct. That person must also represent that no other instrument provisions or amendments limit the stated property powers or authority to exercise another power identified in the certificate.

The signature must be under oath before a notary or another official authorized to administer oaths. Other states differ.

Use the certificate resource below to review its contents. Direct questions about use in a real property transaction, recording or reliance to the adviser handling that transaction.

Removal grounds concern administration and trust purposes

South Carolina: judicial removal grounds

In South Carolina, a court may remove a trustee on any of these grounds:

• The trustee committed a serious breach of trust.
• Lack of cooperation among cotrustees substantially impairs trust administration.
• Because of unfitness, unwillingness or persistent failure to administer effectively, the court determines that removal best serves beneficiaries' interests.
• There has been a substantial change of circumstances or all qualified beneficiaries request removal. The court must find that removal best serves all beneficiaries' interests and is not inconsistent with a material trust purpose. A suitable cotrustee or successor must be available.

Other states differ.

Wisconsin: changed circumstances or unanimous request

In Wisconsin, a court may remove a trustee when circumstances have substantially changed or all qualified beneficiaries request removal. Removal must not be inconsistent with a material trust purpose, and a suitable cotrustee or successor must be available. Other states differ.

For a removal consultation, organize the administration concerns, relevant correspondence, trust purposes and proposed successor information. Use the Virginia question below to examine petition authority and protective relief.

Replacement powers and changes to trustee duties

In Delaware, the following rules apply to trusts administered there or otherwise governed by Delaware law, except as the instrument expressly provides otherwise. The instrument's provisions generally applicable to trustees continue to apply.

A power under the instrument to appoint a successor includes appointment of multiple successors. A presently exercisable power to remove and replace a trustee includes appointment of additional trustees.

An additional appointment modifying an existing trustee's duties takes effect only 30 days after that trustee receives written notice detailing the changes. Notice must come from the persons authorized to appoint additional trustees. The existing trustee may waive the notice requirement. Other states differ.

Bring the actual appointment and removal provisions to counsel. Identify the office involved, the person proposing to act and any proposed change in an existing trustee's duties.

Successor responsibilities concern knowledge and trust property

Utah: knowledge of predecessor conduct

In Utah, the following protection applies when a trustee lacks actual knowledge or information that would cause a reasonable trustee to inquire further. The trustee is protected from liability for failing to take necessary steps to compel redress of a predecessor personal representative's, trustee's or other fiduciary's breach.

The protection does not limit liability for the trustee's own acts or omissions concerning the trust estate. Other states differ.

Texas: knowledge and the successor's response

In Texas, successor liability for a predecessor's breach requires that the successor knows or should know of the situation constituting the breach. The successor must also have committed at least one of these failures:

• Improperly permitting the breach to continue.
• Failing to make a reasonable effort to compel the predecessor to deliver trust property.
• Failing to make a reasonable effort to compel redress of the predecessor's breach.

Other states differ.

Wisconsin: property and known breaches

In Wisconsin, a trustee must take reasonable steps to compel a former trustee or another person to deliver trust property. Reasonable steps are also required to redress known breaches committed by a trustee, former trustee, trust protector or former trust protector.

A successor has no duty to examine a former trustee's accounts. The known breach duty still applies. Other states differ.

Preparing for the property handoff

For the handoff meeting, put the property list beside the proposed delivery arrangements and appointment documents. Bring questions about predecessor conduct to counsel with the relevant records.

Common questions

Resources to check out

• Minnesota: accepting or declining trusteeship: Review acceptance, rejection and limited preliminary actions.
• Virginia: trustee removal: Review petition authority, conditional removal grounds and protective relief.
• Washington: nonjudicial trustee succession: Review designated successor notice and acceptance.
• Texas: successor liability for predecessor breaches: Read §114.002 for the knowledge and successor response standard.
• Minnesota: certificate of trust: Check certificate contents, representations and execution requirements.