September 7, 2016

Trustee Removal

When a beneficiary files a petition it concludes with requests for various forms of relief, e.g. compelling the trustee to submit an accounting, instructing the trustee, determining the validity of a trust provision, determining questions of construction of a trust instrument, approving the modification or termination of the trust, authorizing or directing transfer of a trust or trust property to or from another jurisdiction, etc. Prob C § 17200.

Generally speaking, a court can only grant what the moving party has requested in the petition. For instance, if the petition asks to instruct the trustee to rent a commercial property that has been kept intentionally vacant for years, the order would presumably relate to that subject matter as opposed to something else. In simplistic terminology, "you get what you asked for." 

Still, a probate court is one of general equity. Getty v. Getty (1988) 205 Cal.App.3d 134, 141-142. Thus it can fashion remedies that it sees fit in certain situations, i.e. order something in the interests of "fairness." One example where the probate court can acts on its own motion (known as sua sponte) is removal of the trustee. Prob C § 15642(a). Although  invariably the trustee's conduct will be the primary instigator of this. Hence, it is not as if the probate court would issue orders capriciously.

For example, assume a disgruntled beneficiary petitions for an accounting by the trustee, but not for the removal of the trustee. The trustee has never provided an accounting to the beneficiary and the settlor passed away years ago. The clear language of the trust directs the trustee to provide an annual accounting to the trustee. Furthermore, the beneficiary made repeated attempts to contact the trustee prior to filing the petition but to no avail. Thus, the beneficiary has a credible argument as to why an accounting should be provided.

First, the trustee asks for, and receives, numerous continuances to file the accounting. Second, the accounting the trustee ultimately files is replete with inaccuracies and misleading statements. Third, the accounting also fails to conform to court standards. Prob C § § 1060 - 1064. Cumulatively, the trustee has failed to fulfill their fiduciary duties.

At that point, a trial court is perfectly able to remove a trustee on its own motion. However, in practice, a trustee is typically suspended and then later permanently removed.