Do you need to fire a trustee? Trustees control everything. If you are the beneficiary of a trust it is important for you to have easy access to your funds. Unfortunately, some trustees make it difficult for beneficiaries to access their funds.
This can be the result of a number of issues. Depending on the type of trust and how it was written, you may be able to make a change. Some trustees have been around for hundreds of years, but aren’t focused on innovation. This is because the mindset, “That’s what we have always done”. Trust companies with this type of mindset only cause problems for grantors and beneficiaries.
Trustee Services - Delegated and Directed Trusts
The services trustees offer should be innovative, collaborative, and easy to use. The type of services the trustee may perform will be decided by the trust document. A trustee has two main responsibilities, investment management and distributions. The type of trust document, Delegated or Directed, dictates the risk a trustee may have. A Delegated trust allows the trustee to delegate the investment management to another fiduciary. This gives a trustee more risk. However, a Directed trust has the investment manager named inside the trust. This offers a trustee less risk.
The type of trust, paired with the type of trustee, determines how the trustee services will be performed. The bad part is it also determines if you can fire a trustee. Trust documents should have specific language for adding or removing a trustee. However, often times specific language to change a trustee is not listed inside the trust document. There are certain ways to still be able to change a trustee. For example, does the state you reside have a Nonjudicial Settlement Agreement? If so, you may be able to make a change. An attorney can assist with this process.
However, if your state does offer this statute it still doesn't make it easy to fire a trustee. If you want to fire a trustee it is important to understand that this can be a difficult process.
Reasons to fire a trustee
There are endless reasons to why an individual would want to fire a trustee. The most common reason individuals fire a trustee is because of bad service. This happen between all types of trustees, individual, banks, and advisor friendly trust companies. In contrast, some trust companies make the firing process easy. This should always be the case. If a beneficiary is not happy with the services they are receiving, then they should be able to make a change. A trustee may be innovative and collaborative, but if they don’t offer their clients freedom to make a change, they’re offering a disservice.
Secondly, clients fire a trustee because of fees. If an individual is serving as trustee, they will typically not charge a fee. On the other hand, if a client is working with a trust company, they will always charge a fee. All trust company fees are not created equally. A trust companies two concerns are risk and time. This should be reflected in their fees. If you are a client has a $1,000,000 trust fund, with one distribution a year, then you should not be charged $45,000 a year. Beneficiaries need to understand that when using a corporate trustee, they have options. Trust companies should offer cost-efficient trustee fees.
If a beneficiary chooses a family member or friend as trustee, did they want to be a trustee? Being a trustee is a big responsibility and some might not want to bear that burden.
Make the right decision
In conclusion, making the choice to fire a trustee can be difficult. If you are unhappy with the services you are receiving, then make a change. New independent trust companies make this process easy. When you need to transfer a trust, the trustee should do the heavy lifting. After making the decision, the next step will be to choose a new trustee. Picking a trustee can be daunting, but will also come with new benefits. A financial advisor and attorney can help with this transition, and assist with helping you make the best decision.