Being named as a trustee comes with big responsibilities. A trustee doesn’t just hold onto property or money until it is time to dole it out. They have to manage the trust’s assets, keep the appropriate records, obey the terms of the trust and act in the best interests of the beneficiaries at all times.
But what happens when a trustee stops doing their job? Or maybe they simply can’t handle it all? Sometimes, the problem is obvious. The trustee fails to make disbursements, won’t respond to a beneficiary’s questions or plays favorites. Sometimes, the issues get serious. Money could be missing or property may have been diverted for the trustee’s personal gain. What happens next?
Start by digging through the paperwork
One or two poor decisions and poor communication on occasion don’t automatically mean that a trustee has breached their duties or must be removed. The administration of a trust can take time, particularly when complicated assets must be valued, sold, transferred or reinvested.
However, beneficiaries don’t have to accept silence or poor behavior indefinitely. If you believe a trustee isn’t doing their job:
- The first step is usually to review the trust itself. The document should explain the trustee’s responsibilities, how and when distributions should be made and whether beneficiaries have particular rights to information or accountings.
- If the problem remains, the next step may be to request a formal accounting. An accounting can provide information about the management of a trust’s assets, income, expenses, distributions and other transactions. That could mean providing records, making a required distribution or explaining a questionable transaction.
- Negotiation or mediation may provide a way to resolve disagreements, particularly when the problem involves communication, different interpretations of the trust or conflict among family members.
If those efforts don’t work, court action may be an option. Under New York Estates, Powers and Trusts Law Section 7-2.6, an interested person can ask the court to remove a trustee who has violated the terms of the trust, is insolvent or is otherwise unsuitable.
SCPA Section 711 also provides grounds for removing fiduciaries. Depending on the type of trust and circumstances, grounds can include dishonesty, wasting or improperly applying assets, failing to obey court orders or otherwise being unfit to serve.
Removal isn’t automatic simply because beneficiaries raise an issue. New York courts generally require sufficient proof and grounds before making changes. There are steps you can take to try to correct the problem and – when that fails – ask a court to step in.