We often receive inquiries about whether a trustee has the authority to eliminate a beneficiary from a trust, and this article aims to address this question. However, it is essential to acknowledge that removing a beneficiary from a trust is a multifaceted and sensitive issue that must be handled cautiously to avoid potential legal repercussions.
Thus, this blog post not only answers whether a trustee can remove a beneficiary from a trust, but it also offers a comprehensive overview of the circumstances that may prompt a trustee to take such action and the potential consequences that could result.
So, without further delay, let us delve into this topic and explore its intricacies together.
Who is a Trustee?
Since the whole point of setting up a trust is to cater to the future needs of your surviving children and relatives, we can therefore say that naming a trustee in your trust is just as important as anything else.
Simply put, a trustee is a person or an organization appointed by a property owner to help manage his or her properties or assets that have been placed in a trust for the benefit of another person or entity, known as the beneficiary.
What differentiates a trustee from other types of administrators is that they have a fiduciary duty to act in the best interests of the beneficiaries. This means that a trustee must administer a trust according to the terms of the trust. In that, they must distribute all the assets in the trust to all the beneficiaries listed in the trust.
Apart from distributing the assets to the intended beneficiaries, a trustee is also responsible for managing the assets in the trust, making investment decisions, distributing income and/or principal to the beneficiary, and ensuring that the trust is administered per the wishes of the person that created the trust.
Role of a Trustee to the Trust Beneficiaries and the Trust Itself.
Aside from managing the assets held in trust for the benefit of the trust’s beneficiaries, trustees are also responsible for a lot of things, including
- Fiduciary duty: One of, and perhaps the most important responsibilities of a trustee is their obligation to act in the beneficiary’s best interests and manage the trust assets per the terms of the trust.
- Manage the assets in the trust: Another responsibility of a trustee is to manage all the assets held in the trust properly. Note that the assets in question here don’t always have to be landed properties; they could be money or other valuables such as artwork, etc.
- Distribution of income and/or principal: Another responsibility of a trustee is to help distribute the income and/or principal to the trust’s beneficiaries in accordance with the terms of the trust.
- Record-keeping: Aside from distributing income and assets, a trustee is responsible for keeping important records of all transactions made during his/her trusteeship tenure. This would include investments records, how assets were distributed, and other financial transactions.
- Reporting: A trustee is also responsible for providing timely and accurate reports to the beneficiaries and the court (if need be).
- Legal and tax compliance: Lastly, a trustee is also responsible for ensuring that the trust they administer complies with all relevant legal and tax requirements. He or she must file a tax return and obtain all the necessary licenses and permits.
Who is a Trust Beneficiary?
Just like a last will, a trust must also have intending beneficiaries. Therefore, a trust beneficiary is a person designated in the trust as a recipient of a portion of the trust’s assets. It should be noted that a trust beneficiary can be anybody. It could be the surviving kids or spouse of a property owner. Also, it could be relatives, friends, or even a charity organization.
Anyone named as a beneficiary in a trust will receive continuous dividends from the trust, or they may receive all of the monies or assets allotted to them upon the death of the trust’s creators.
Can a Trustee Remove a Beneficiary from a Trust?
Generally, a trustee needs more authority to remove a beneficiary from a trust since an irrevocable trust aims to ensure that the beneficiaries receive what the trust creators intended. However, this situation may change, provided that a trustee is granted a power of appointment by the trustor before he passes on. If a trustee is granted a power of appointment, they may be able to modify the terms of a trust.
But then again, a power of appointment does not necessarily provide a trustee with a “direct mechanism” for removing a beneficiary from the trust. Let’s take family trusts, for example, a surviving spouse may hold the power of appointment, but then again, he or she may not have the full power to remove a trust beneficiary, such as the surviving children, from the trust.
What we are saying here, in essence, is that a trustee can remove a beneficiary from a trust, but then again, it rarely happens because of its complexity. Hence, the creator is the only person with the ultimate Power to remove a beneficiary from the trust.
What to do if You Notice That a Trustee is Trying to Remove You From a Trust?
If you were previously named as a beneficiary of an asset, and after a while, you began to suspect that you may have been removed from a trust by a trustee via a power of appointment. Then it is about time you contact a certified trust litigation attorney around you for proper and professional guidance on how to go about it. Take it from us; the sooner you report issues like this, the better.
Conclusion
There are many complexities surrounding the question of whether a trustee can remove a beneficiary from a trust. In many cases, it’s in all parties best interest to seek the assistance and advice of experienced wills and estates attorneys to ensure that any changes made meet all legal prerequisites.
At Saanichton Law Group, our lawyers understand the many nuances involved with estate planning and will work with you to complete the process in an efficient and legally sound manner. Whether you need help drafting a trust or modifying existing documents, our team is here to assist you every step of the way. We welcome your inquiries, so please don’t hesitate to contact us at 2505440727 today for trustworthy legal advice tailored specifically to your unique situation.
