What You Need To Know
Testamentary freedom means, in part, you can choose whoever you want to be in charge of your estate after death. The person so appointed is called the executor and estate trustee (“Estate Trustee”). So what happens if the Estate Trustee is incompetent? A thief? Or just plain unfair or unreasonable? Will a court make an order that the Estate Trustee be removed and replaced?
Courts do not remove and replace Estate Trustees easily. Often, misconduct by the Estate Trustee must be evident to warrant his/her removal. Let’s take a look as some examples when the Court removed Estate Trustees:
Friction between Trustees
If trustees are so dysfunctional that the proper administration of the trust is at risk the court may remove the Estate Trustee because the welfare of the beneficiaries must be the court’s most important consideration. The key here to remember is that the welfare the beneficiaries is the priority – not necessarily fairness to the Estate Trustees.
Removal even when Trustee does a perfect job
In some cases like bankruptcy, conviction of a crime, removal from the jurisdiction, or illness the courts will order that the Estate Trustee be removed.
Breach of Duties as estate Trustee
The Estate Trustee is considered a fiduciary. As a fiduciary there is a heightened duty to act honestly, in good faith and in the interests of the beneficiaries. Breach of those duties may lead to a court removing the Estate Trustee. As articulated by Professor Waters “It is a fundamental principle of every developed legal system that one who undertakes a task on behalf of another must act exclusively for the benefit of the other, putting his own interests completely aside.” With Professor Water’s comments in mind here are some examples where the courts removed the Estate Trustees because of the breach of their duties:
- When executor owned property in partnership with the deceased and estate offering to sell that property to executor;
- When the Estate Trustee borrowed money from the deceased and not having repaid loan;
- When the Estate Trustee claimed debt from the Deceased for past services rendered;
The duty to maintain an even hand
A court has to ask itself whether it would be difficult for the Estate Trustee to act impartially. If the answer is yes then the removal of the Estate Trustee may be justified. That difficulty to act impartially may be because the Estate Trustee has a personal interest in the Estate or it may be because there is such animus between the beneficiary and Estate Trustee that it would be very difficult to treat the beneficiaries equally. In such a circumstances the court may remove the Estate Trustee.
The duty to disclose and account
Beneficiaries have a right to know how much the estate was worth, whether the Estate Trustee fulfilled his/her mandate, paid all the debts and properly distributed the estate. The Estate Trustee demonstrates all of this by presenting his/her accounts to the beneficiaries. It is generally accepted that there is no mandatory legal requirement to go to court and have the court approve of the accounts. However, there is a duty of the Estate Trustee to retain proper accounts and when required to do so present them to the beneficiaries. A court may remove an executor for hiding assets from the co trustees and or declining to present a proper accounting to the beneficiaries.
This short general overview is really just a basic introduction to the topic. It is far from complete. There are many legal memorandum, chapters and legal texts entirely devoted to this topic. I mention this because this short article is not meant to be legal advice. Reading this article is only meant to be the first step for those who are considering commencing an application to remove an Estate Trustee.
I caution the reader that judging the strength of your case could be complicated and one should not conclude it is worthwhile to proceed just because your fact situation sounds similar to the ones outlined above.
The bottom line – nothing replaces seeking out the counsel of a qualified lawyer who specializes in this niche area of the law and has the expertise to guide you in your decision making process.
It’s not just about the law. It’s also about knowing the process well enough to determine whether the prospects of success warrant the economic and emotional investment.
Call us for more information.