How to Change Trustees on Revocable Trusts vs. Irrevocable Trusts
From filling out a change of trustee form to delivering notices to interested parties, the process of changing trustees can be complicated. Read Keystone's comprehensive guide to better understand it.
- Keystone News
- 850 Petitions
- Attorney-Client Privilege
- Attorney's Fees
- Caretaker Issues
- Competency/Undue Influence
- Evidence / Procedure
- Fiduciary Misconduct/Removal
- Lis Pendens
- Marriage and Community/Separate Property
- No Contest Clauses
- Non-Probate Transfers
- Petition for Instructions
- Powers of Appointment
- Real Estate Disputes
- Spendthrift Clause
- Statute of Limitations
- Probate News
- Probate Services
- Who We Help
Some trusts call for a single lump-sum disbursement, but did you know there are other trusts that call for trust fund disbursements to be made over several years or decades?
As the years pass, the life situations of trustees can change. For example, they might encounter health issues, or get married and have children, which could affect their ability to fulfill the responsibilities of their role. In such cases, it may be necessary to change trustees.
Can you change the trustee on a revocable living trust? Can you change the trustee on an irrevocable trust? Can you change the trustee of a trust if the trust instrument does not provide instructions for doing so?
In this article, you will learn about the types of situations that call for a change of trustees. Additionally, you will learn how to change a trustee on a revocable trust versus an irrevocable trust.
How Is a Trustee Appointed?
In order to understand how a trustee is appointed, you must also understand how a trust works after death. When drafting their trusts, trust creators (known as settlors, grantors or trustors) generally will appoint themselves as the original trustee and someone else to take over as trustee once they die or become incapacitated. The person nominated to take over is known as the successor trustee.
Unlike executors and administrators, trustees generally aren’t required to be formally appointed to their role by the court. Likewise, trusts, unlike wills, usually don’t need to pass through the probate process.
Trusts can be administered privately during the settlor’s life, but once the settlor becomes incapacitated or dies, the successor trustee will have to start managing the trust. It is standard for them to be able to launch trust administration and begin tackling their trustee responsibilities without delay, but the trust instrument should always be consulted to determine exact protocols surrounding the settlor’s incapacitation or death.
While some settlors draft their trust instruments with the expectation that the person they name as successor trustee will remain in the role until the end of administration, most plan for the possibility that the trustee may need to be changed at some point and include a protocol within the trust instrument for making such a change.
Why Might You Need to Change a Trustee?
Perhaps the person who was designated as the successor trustee decided they are not interested in filling the role. Perhaps the successor trustee is losing capacity due to old age and consistently making mistakes while administering the trust.
Circumstances change, and when they do, the trustee may need to be changed as well. Learn about the most common reasons for a change of trustees from the following sections.
The Trustee Has Refused Their Appointment
If the person named as successor trustee does not wish to serve, they have the right to refuse their appointment. In some situations, it may actually be the right thing to do.
For instance, even if a settlor’s loved one agreed to serve as successor trustee at the time the trust was signed, they may have a demanding job now that would make it impossible for them to fulfill the obligations of the role. As such, their serving as trustee would not be in the beneficiaries’ best interests.
While only appointed trustees are required to follow resignation procedures, named trustees who are refusing their appointments should notify the relevant parties of their decision not to serve so a replacement can be found.
The Trustee Has Resigned
A trustee’s job is not easy. They have duties they must fulfill, laws they must obey, and trust beneficiaries whom they must keep in the loop. It’s reasonable for a trustee to choose to resign if their life circumstances have changed or if they simply desire the role to be passed on to someone else.
A trustee may also resign because of problems they are having with the beneficiaries. For instance, if the beneficiaries are seeking removal of the trustee on account of trustee misconduct, the trustee may voluntarily resign in exchange for a settlement to avoid more serious penalties from being handed down by the court later.
It is important for both trustees and beneficiaries to thoroughly understand what the trust instrument requires in order for the trustee to resign. For example, some trusts may call for the trustee to not just send a resignation letter to interested parties but remain in the role until a suitable replacement can be appointed.
In general, once a trustee has accepted their appointment as trustee, they can resign according to the procedure described in the trust instrument. If the trust is silent on resignation, they can resign in accordance with the methods detailed in California Probate Code section 15640.
The Trustee Has Filed for Bankruptcy
If the trustee goes bankrupt, it may indicate they are unfit to manage the trust — which can signal that the trustee needs to be changed. Also, an insolvent trustee may be more tempted than a solvent trustee to misappropriate trust assets or commit other acts of fiduciary misconduct while in control of a trust fund.
If beneficiaries are aware of the trustee’s financial situation, they may raise valid concerns about the trustee’s ability to ethically administer the trust. It would be justified for them to try to change trustees.
The Trustee Has Become Physically or Mentally Incapacitated
Serving as a trustee requires one to perform a variety of tasks, such as trust accounting, carrying out real estate transactions, investing trust assets, and keeping beneficiaries informed, among other things. If the trustee is unable to perform these essential tasks, is making a lot of mistakes or seems generally out of sorts, it could signal that they have become incapacitated and need to be replaced.
Some trusts remain open for many years, so the trustee may reach an advanced age before their duties end. While advanced age doesn’t necessarily mean a trustee needs to be changed, beneficiaries should be on the lookout for signs the trustee is losing capacity.
If the trustee displays a pattern of concerning behavior, beneficiaries should act fast to change trustees to prevent the current trustee from harming the trust. In fact, many trusts take into account the possibility of the trustee becoming incapacitated and provide instructions for replacing the trustee without court intervention. A probate attorney can help with the process of changing trustee.
The Trustee Has Died
One of the most common reasons why a trustee is replaced is because they passed away. In such a case, a new trustee should be appointed as soon as possible to continue the administration of the trust.
When beneficiaries are slow to replace a deceased trustee, they are doing themselves a disservice, because if administration is delayed, their distributions from the trust will be delayed, too.
The Trustee Has Acted in Bad Faith
It’s unfortunate that there are bad trustees who use their power to commit acts of wrongdoing that benefit themselves or others who are not involved with the trust.
Perhaps the trustee invested trust assets in their own business endeavor, even though doing so was risky. Perhaps the trustee is neglecting their responsibility to keep beneficiaries reasonably informed. Perhaps the trust has suffered a significant loss in value while under the management of the trustee.
All of these are valid reasons to try to change the trustee; however, unless the trustee agrees to step down willingly, a petition will need to be filed with the court for the change to be effectuated. Keep in mind that there’s no guarantee the petition will be approved. You’ll need to prove the trustee’s mismanagement of trust assets, which can be easier to do with an experienced attorney at your side.
How to Change Trustees on a Revocable Trust
Revocable trusts are designed to be flexible while the settlor is alive. In other words, the settlor is allowed to revoke or modify their trust — including their choice of successor trustee — at any time. However, once the settlor of a revocable trust dies or becomes incapacitated, the trust generally will become irrevocable by default, making it more difficult to modify.
In the subsections below, we discuss the steps involved in changing trustees once a revocable trust has become irrevocable following the death or incapacitation of the settlor.
Consult the Trust Instructions
When drafting a trust, it’s common practice for settlors to include a clause that provides instructions for replacing the successor trustee.
Some trusts name an alternate successor trustee. Some provide a specific person with the authority to remove and replace the trustee. Some only allow replacement of the successor trustee if the trustee resigns.
If no instructions are provided within the terms of the trust, then it may be necessary to turn to the court to have a new trustee appointed. Review the trust provisions to learn how to change the trustee of the trust. If you are having trouble finding the information you’re seeking, then it may be a good idea to consult with a probate attorney about next steps.
Select a Replacement Trustee (When Applicable)
If an alternate successor trustee is not named in the trust, a new successor trustee will need to be appointed. The trust may outline a procedure for replacement, but if it does not, the beneficiaries likely will need to petition the court for an appointment to be formalized.
Some trusts require beneficiaries to unanimously agree on a replacement trustee. Others give a specific person the authority to make the decision. Regardless, the instructions provided by the trust instrument must be followed unless the court intervenes.
If a trust has co-trustees, then the co-trustee that resigned or was removed doesn’t need to be replaced unless the trust calls for it or the other co-trustees want a replacement.
It is possible the trust will require the current successor trustee to remain in their role until a new successor can be appointed. But if the current trustee mismanaged the trust or stole assets from it, beneficiaries may wish to file a petition for trustee suspension to prevent further harm to the trust. If the petition is approved, a temporary trustee may be appointed to serve until a permanent successor can be found.
Beneficiaries and co-trustees (if there are any) should try to get on the same page about who they want to replace the current successor trustee. While it may be hard to reach a compromise, it is necessary to keep administration on track.
Complete a Change of Trustee Form
Regardless of whether the procedure for changing trustees is included in the trust instructions, you will need to formally document the change so that third parties dealing with the trust can be assured the successor trustee has been validly appointed.
The documents required to effectuate the change of trustee will depend on the circumstances leading to the change (e.g., the prior trustee’s resignation, incapacity). A lawyer can help you determine the exact forms you will need.
If the trust owns real properties, for example, a change of trustee form (known as an Affidavit of Change of Trustee or an Affidavit of Death of Trustee in California) will be required in order to finalize the appointment of a new successor trustee. This form should be recorded on titles to the real properties so that third parties (e.g., buyers of real estate, lenders) will know the successor trustee is authorized to enter into transactions concerning the property. For help filling out or filing an Affidavit of Change of Trustee, seek out the services of an experienced probate attorney.
How to Change Trustees on an Irrevocable Trust
Because an irrevocable trust is designed to be unchangeable, it begs the question: Can you change the trustee on an irrevocable trust?
If a trust is irrevocable, the trustee can still be changed or removed in accordance with the terms of the trust or by order of the court. It is important to note, however, that when a trustee of an irrevocable trust is replaced, the trust itself will dictate who takes over as their successor.
But what happens if interested parties (e.g., the beneficiaries and co-trustees) want to modify the terms of the trust governing trusteeship? Is it possible to amend the terms of an irrevocable trust?
Interestingly enough, the answer to this question is yes, but it is usually a complicated process. It makes a difference whether or not the settlor is still alive. If they are alive, they potentially can get consent from the beneficiaries to amend their trust to change the trustee.
If the settlor is deceased, a petition will need to be filed by an interested party (such as a beneficiary or co-trustee) to modify the provisions of the trust dealing with trusteeship; however, the court will not approve the petition without there being a valid reason for doing so.
Since changing the trustee on an irrevocable trust is generally more difficult than changing the trustee on its revocable counterpart, it’s essential to have an attorney on your team to increase your chances of a favorable outcome.
How to Change a Trustee of a Family Trust
The process for changing the trustee of a family trust is largely the same as the process for changing the trustee of a revocable trust, given that family trusts are also revocable. In fact, the terms “family trust,” “living trust” and “revocable trust” can be used interchangeably to refer to a revocable trust.
If the settlor is alive, they can simply change the terms of their revocable family trust to name a different successor trustee. If the settlor is deceased, then the trust instructions should be consulted to determine whether a procedure for changing trustees is provided. If not, then a petition may need to be filed with the probate court.
A Trust Attorney Can Guide You Through the Process
Unless you have legal experience, you may want to hire an experienced trust attorney to help you change the trustee of a trust so the process is as seamless as possible.
Here are some ways a probate attorney can help you with changing trustees:
- Interpreting the trust instrument to clarify the instructions for changing trustees
- Analyzing whether changing the trustee is the best course of action in your situation
- Filing the necessary petitions with the court to change trustees
- Making arguments in front of the court to help you secure a change of trustee
- Defending trustees who are at risk of being removed and replaced
- Answering any questions you have along the way to take the stress out of the experience
While there is nothing to prevent you from going about the process of changing trustees on your own, the right attorney can ensure the process is carried out swiftly and in accordance with the law.