Happy New Year from The Mottley Law Firm! Although every January 1st brings with it an opportunity to turn over a new leaf and make resolutions that we may or may not keep, this one feels a bit different. For most, 2020 was an especially difficult and trying year. Here's to hoping that 2021 will be better for everyone!
As I was brainstorming this post, I wanted to pick a topic that fit with that "out with the old, in with the new" theme. It occured to me that we receive a lot of inquiries asking how, and under what circumstances, a trustee can be removed and replaced with a substitute trustee. Many, if not most, of those inquries arise from alleged misconduct by the trustee, but Virginia law recognizes several different circumstances under which a trustee can be removed from their position.
In this post, we'll cover: (1) Who can petition a Court to remove a trustee?; (2) What circumstances warrant the removal of a trustee?; (3) How is a petition to remove a trustee made?; and (4) Who will a court appoint as successor trustee?
Who Can Petition To Remove A Trustee?
Virginia law only allows certain specified people to petition a court to remove a trustee. They include:
- The settlor (i.e., the person who created the trust).
- Trust beneficiaries.
- In the case of a charitable trust, the Virginia Attorney General.
A court may also act on its own to remove a trustee, if it finds that the proper grounds to do so exist.
What Circumstances Warrant Removal Of A Trustee?
Again, most of the calls we receive asking about removing a trustee involve some sort of alleged misconduct. Of course, if a trustee commits a serious breach of trust, they can be removed from their position. But there are several other recognized grounds for removing a trustee, including:
- Lack of cooperation between co-trustees that substantially impairs the administration of the trust.
- Unfitness, unwillingness, or persistent failure by the trustee to effectively administer the trust, provided that the court determines that removal of the trustee best serves the beneficiaries' interests.
- A substantial change of circumstances relating to the trust.
- The consent of all qualified trust beneficiaries, provided that the court determines that: (1) removing the trustee best serves the beneficiaries' interests and is not inconsistent with a material purpose of the trust, and (2) there is a suitable co-trustee or successor trustee available.
A separate statute addresses circumstances in which a court may appoint a trustee in place of the one named in the trust instrument. Those circumstances include:
- If the trustee dies or becomes incapable of serving because of physical or mental disability or incarceration.
- If the trustee is required to be a resident of Virginia, and moves out of state.
- If the trustee declines to serve or resigns.
- If a corporate trustee is bankrupt or loses its charter.
- Any other good cause shown.
How Is A Petition To Remove A Trustee Made?
If no lawsuit involving the trust is pending, any of the persons listed above may institute a new lawsuit seeking to remove a trustee by filing a petition or complaint. However, if a suit relating to the trust is already pending, the party seeking removal of the trustee need not file a new suit or amend their pleadings to add a claim seeking to remove a trustee. Virginia law provides that a proceeding to remove a trustee and appoint a substitute trustee may be brought by motion, so long as the movant provides notice of the motion to all persons interested in the trust.
Who Will Be Appointed As Successor Trustee?
Virginia's Uniform Trust Code establishes an order of priority for the appointment of a successor trustee when there is a vacancy in the trusteeship. With respect to noncharitable trusts, which most run-of-the-mill trusts are, the order of priority is as follows:
- A person designated by the trust to serve as successor trustee.
- A person appointed by unanimous consent of the qualified beneficiaries.
- A person appointed by the court to serve as successor trustee.
Charitable trusts, on the other hand, generally don't have "qualified beneficiaries." Instead, the charitable organizations expressly designated to receive distributions from the trust can pick a successor trustee, provided that the Attorney General must also agree if he has previously asked to be consulted about who should be appointed.
Our Estate Law Attorneys Have Experience With Requests To Remove Trustees
Here at The Mottley Law Firm, we have experience handling cases involving requests and petitions to remove trustees and other fiduciaries. If you are a settlor, beneficiary, or co-trustee of a trust, and you believe that a trustee should be removed from their position, we might be able to help. If you are a trustee, and you believe someone is unfairly trying to remove you from your office, we might be able to help with that too. Don't wait. Contact us today.