Can a Trustee Remove a Beneficiary?


Can a trustee remove a beneficiary? When administering a trust, the trustee has a fiduciary duty to distribute the estate assets as specified in the trust instrument. A trustee cannot frivolously decide to remove a beneficiary from the trust distribution. But there are certain circumstances in which a trustee may remove a beneficiary. 

Can a Trustee Remove a Beneficiary?

A revocable trust grantor (also known as a trust settlor) is the person who establishes the trust. As the original trustee, they hold the right to change the trust distribution at any time prior to their death. After the original trustee dies, the revocable living trust becomes an irrevocable trust. The successor trustee named in the trust document then steps into the role. 

Regardless of how the trustee thinks the trust should be distributed, they have a fiduciary duty to administer the terms of the trust as written. Some trusts may grant the trustee the power to determine whether and when to distribute trust assets to a beneficiary, but not to remove them completely- unless they were granted powers of appointment.

Understanding Powers of Appointment

A power of appointment is a legally binding provision contained in some trusts which gives the trustee authority to remove or change beneficiaries and/or the distribution of trust assets. Sometimes a married couple creates an estate plan that names the surviving spouse as trustee and gives them general or limited powers of appointment.  

Occasionally, a surviving spouse who has been granted power of appointment as trustee chooses to disinherit children from a previous marriage, especially if they want to favor their own blood heirs. This tends to be rare, however, since a good trust and estate attorney can suggest a variety of tools to preserve an inheritance for both spouses if they have children from previous relationships.

Can Beneficiaries Waive Their Inheritance?

While a trustee cannot usually remove a beneficiary, a beneficiary who does not wish to get an inheritance can remove themselves from the trust distribution. A beneficiary may want to disclaim their inheritance for a variety of reasons, such as tax implications, to better fulfill what they understood their loved one’s wishes to be, or simply because they’re financially secure and don’t need the money.

A beneficiary who wishes to disclaim their inheritance should work with the attorney handling the trust administration to do so. Then the next heirs in line would stand to inherit the disclaimed assets.

Disinheriting Beneficiaries Who Contest

If the decedent’s estate plan contained a no-contest clause, a trustee can remove a beneficiary who contests the decedent’s estate plan. A no-contest is a common trust provision intended to ward off potential attempts to overturn the estate plan. This clause states that any beneficiary who contests the trust will be disinherited. 

If a beneficiary instigates trust litigation and the court rules against them, the trustee would be able to remove them. However, it is often beneficiaries who have already been disinherited who try to challenge the estate plan. Many litigated matters are resolved outside of court in mediation where a compromise is reached. So even a beneficiary who challenges the trust may still get a partial inheritance through mediation negotiations.

While a no-contest clause does pose a threat to frivolous claims, there are legitimate reasons to challenge a trust. If the trust names you as a beneficiary and the trustee is withholding your inheritance, you may have a legitimate legal claim. If you suspect that a trustee is illegally preventing you from receiving an inheritance, you should seek out an experienced trust litigation attorney immediately for legal advice.

Law Offices of Daniel A. Hunt

The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.