In most cases, a trustee cannot remove a beneficiary from a trust that the trustee manages. But the law is designed to address all potential scenarios. There may be circumstances in which a trustee may be able to make it happen.
A trust creates a fiduciary relationship in which one party, known as a settlor, gives another party, a trustee, authority over assets assigned to the trust for the benefit of a third party, the beneficiary. A trust is generally a means of passing wealth from one generation to the next or to other recipients, such as charities. A trust also protects assets within the trust from creditors and may provide tax advantages.
California’s Probate Code gives a trustee numerous powers and responsibilities that revolve around collecting, preserving, protecting, investing, and growing a trust’s assets. The trustee also has the power to distribute property and money from the trust. The terms of the trust may give the trustee specific authority, including the power to determine whether to distribute trust assets to a beneficiary. This could allow the trustee to effectively remove the beneficiary from the trust. Absent such a clause, California law does not explicitly grant trustees the right to withhold assets from beneficiaries.
Unfortunately, some California trustees overstep their authority, and innocent beneficiaries become victims of abusive fiduciaries. When trustees fail to live up to their legal duties, the attorneys of Albertson & Davidson, LLP stand up for the rights of abused trust beneficiaries. We have successfully attacked and defended California trustees over beneficiary rights, so we understand the complexities of these cases.
If you are a trust beneficiary and believe a trustee is not distributing assets to you as intended by the trust’s bylaws, schedule a free consultation today to discuss your case.
How Could a Beneficiary Be Denied Benefits of a Trust?
Trust agreements usually specify how and to whom their assets will be distributed. A trustee has the fiduciary duty to administer the terms of the trust as written.
If the trustee is also the settlor (original funder) of a revocable trust, they have the right to rewrite the terms of the trust at any point in time. This can include removing a beneficiary.
Some trusts give a trustee who is not the settlor “power of appointment,” or authority to remove or change beneficiaries and/or the distribution of trust assets.
When a married couple establishes a revocable trust as part of their estate plan and one of them dies, the trust often provides that the surviving spouse becomes the trustee and gives them general or limited powers of appointment. A surviving spouse who has different ideas about funding a charity or bequeathing assets to a step-child might change the trust and eliminate a beneficiary. However, instead of allowing this unfortunate situation to unfold, proper estate planning can preserve assets so that each spouse provides an inheritance for children from previous relationships.
Unsuccessful Trust Contests May Lead to Removing a Beneficiary
Another clause inserted into many trusts is a “no contest” clause, which forbids beneficiaries from contesting the terms of the trust. It would simply state that any beneficiary who unsuccessfully challenges the terms of the trust forfeits any benefits the trust grants them.
But a beneficiary might appropriately contest a trust because it was established illegally, such as through fraud, undue influence, or duress, upon the settlor, the settlor’s lack of mental capacity, or because the person who helped set up the trust (other than the settlor) will benefit from the trust.
Under current California law, a no-contest clause will only be enforced if:
- A transfer of property is challenged on the grounds that it was not the transferor’s property at the time of the transfer.
- A creditor files a claim or takes legal action against the estate based on such a claim.
To be enforceable, the no-contest clause must expressly state that it applies to challenges of property transfers or creditors’ claims.
- The beneficiary contests a will or trust without probable cause.
Having “probable cause” is a low bar to meet. A beneficiary need only believe at the time of the challenge that there is a “reasonable likelihood” that their request will be granted “after further inquiry and discovery,” or a closer look at the facts of the case.
A beneficiary has a right to enforce the terms of a trust and to hold a trustee accountable. Our attorneys can help you petition the courts for the justice you deserve as a rightful trust beneficiary.
When A Beneficiary Disclaims Their Inheritance
A beneficiary might not want the property left for them in the trust. This could be for personal reasons (animosity, as a declaration of independence, etc.) but would more likely be to avoid tax implications of the gain and/or because they did not need it.
An attorney could help a beneficiary disclaim their inheritance from a trust in writing as required and file it with the trustee or the county superior court where the decedent’s estate is being administered.
Let Us Protect Your Rights as a Trust Beneficiary
The aggressive lawyers at Albertson & Davidson, LLP help trust beneficiaries whose rights are being abused by filing trust contests throughout the State of California. Our in-depth knowledge of trust, estate, and probate matters makes us powerful advocates for trust beneficiaries whose inheritance is being threatened by the wrongdoing of trustees.
Founding lawyers Stewart Albertson and Keith Davidson are trial attorneys who focus on trust and estate litigation. We handle many trust contests and abuse of trust beneficiary claims on a contingency fee basis, which means you do not pay any upfront costs. Contact us online or at (855) 928-0542 for a free initial consultation about your case. We stand. We fight. We win.
