1999 Lane Reports

Dumping Your Trustee

Sunday, August 1, 1999
by Marc J. Lane

Grandpa is more likely to be nervous about Suzi, with all those tattoos, or Joey, who drives the beater without the muffler, than old, established First National. The bank's stately edifice has dominated First and Main as long as Gramps can remember.

But in this world of depersonalizing bank mergers and escalating fees, it's just possible that some day Grandpa or his trust's beneficiaries may want to replace First National with another trustee which is more sympathetic to the family's needs.

The sad reality is that trusts aren't always so accommodating. And well-paid trustees aren't always so quick to step aside.

The easiest precaution one might take to deal with the possibility that a trustee might become unfriendly or unaffordable - but a precaution too often neglected - is a "removal clause," language in the trust document which permits a majority of the beneficiaries to replace a trustee. The
better drafted removal clauses require that the new trustee be at least as financially strong as the old one. They also put the kibosh on "termination fees," a penalty clause that does nothing but further enrich the trustee you might detest by then, anyway. And they preserve the beneficiaries' right to sue the original trustee for misconduct, even after a different institution steps in.

Another tack is to empower the beneficiaries. By naming one or more of them as a "co-trustee," the institution's hands are benignly tied. Money simply can't be disbursed without a family member's signature.

When all else fails, and sometimes it does, the beneficiaries may need to take matters into their own hands. If the trust which provides for them lacks a "removal clause" - and many do, and if no co-trustee has been named - and often one isn't, the trust just might be forced to terminate. And, with no trust, there is, of course, no trustee.

Suppose, for example, that the trust is to pay all its income to Mom and Pop for the balance of their lives and that the trust's principal is then to be paid out to their kids. If Mom and Pop were to forgo their right to income, the Probate Court might not be overjoyed at the idea, but the trust's principal would be payable, now, to Gramp's grandkids.

Dissolution is a step not lightly to be taken but one among many which might be considered when a trust has not been drafted as carefully as it should have been - and when the trustee becomes more a family foe than a family friend.

Send this page to a friend

The Lane Report is a publication of The Law Offices of Marc J. Lane, a Professional Corporation. We attempt to highlight and discuss areas of general interest that may result in planning opportunities. Nothing contained in The Lane Report should be construed as legal advice or a legal opinion. Consultation with a professional is recommended before implementing any of the ideas discussed herein. Copyright, 2003 by The Law Offices of Marc J. Lane, A Professional Corporation. Reproduction, in whole or in part, is forbidden without prior written permission.

Announcing Marc J. Lane's 35th Book:

The Mission-Driven Venture: Business Solutions to the World's Most Vexing Social Problems

More About The Book
Our monthly newsletter