In short, yes. A trustee can be replaced (the technical term is removed). Grounds for removal are found in multiple places.
Removal Per the Trust Instrument
Often, the trust instrument grants the power to remove the trustee to a particular person or persons. The trust will state whether the power to remove the trustee can be exercised with or without “cause”. If removal requires cause, what constitutes cause may be stated in the trust instrument. If the trust is silent on this issue, then cause may be found, for example, where there is hostility from the trustee that impairs the administration of the trust, where the trustee fails to comply with the terms of the trust, where the trustee fails to comply with fiduciary duties to provide information, and where there are conflicts of interest.
To remove the trustee pursuant to a power granted in the trust instrument, the person with the power must follow the procedure for removal set forth in the trust instrument. The removal act should be done in writing and that writing should be kept as part of the trust records.
Removal by Court Action
A trustee can be removed by court action. A petition can be brought by a settlor, co-trustee, or beneficiary with standing to remove the trustee. The grounds for removal of a trustee by the court include the following:
- where the trustee has committed a breach of trust
- where the trustee is insolvent or otherwise unfit to administer the trust
- where hostility or lack of cooperation among co-trustees or with a beneficiary impairs the administration of the trust
- where the trustee declines or fails to act
- where the trustee’s compensation is excessive under the circumstances
- where there are irreconcilable conflicts between the trustee’s personal interests and those of the trust
- where there are conflicting duties (e.g. a trustee’s duty to the trust might conflict with the trustee’s duty as board member of corporation in which the trust owns an interest)
- where the trustee is substantially unable to properly execute his/her duties
- where the trustee cannot resist fraud or undue influence
- for other “good cause”
The decision to bring an action to remove a trustee should not be made lightly. A removal action can be very expensive. To bring a successful petition, you must provide proof to the court that grounds exist for removing the trustee. This involves informal and formal discovery, which can be costly. Discovery is the process where you try to obtain as much evidence as you can to prove the trustee should be removed and where the trustee tries to gather evidence that he/she should not be removed. It can involve obtaining documents, taking depositions, and even retaining experts. Additionally, the removal action is subject to the other normal court procedures, such as pre-trial motions, which can be costly to bring or defend depending on their complexity. In short, the process is expensive and can take years to wind through the court system.
If at all possible, start by asking the trustee to resign and avoid a long court battle.
If that’s not possible, make sure the decision to seek a court order removing the trustee is not grounded in emotion but rather in provable facts.