The Legal Requirements for the Removal of a Trustee
No man is infallible; the wisest make mistakes; but the law holds no man responsible for the consequences of his mistakes which are the result of the imperfection of human judgment, and do not proceed from fraud, gross carelessness, or indifference to duty. In re Margow’s Estate, 77 N.J. 316, 326 (1978); Connelly v. Weisfeld, 142 N.J. Eq. 406, 411 (E. & A. 1948); see also In The Matter of the Estate of Edward A. Cantor, Docket No. A-4233-03T54233-03T5, (App. Div. 2005).
A “trustee” is responsible for managing trust funds and assets and doling them out to the beneficiaries when required.
The designation of a trustee often draws the ire of others having an interest in the trust, thereby subjecting the trustee to harsh criticism and accusations regarding how the trustee is “handling the money.” Occasionally, those close to the trust will even seek to have the trustee removed. What are the legal standards for doing so?
As per N.J.S.A. 3B:31-51, ‘Removal of Trustee’:
b. The court may remove a trustee for any of the reasons stated in N.J.S.A. 3B:14-21 [reproduced below in its entirety].
c. Pending a final decision on a request to remove a trustee, or in lieu of or in addition to removing a trustee, the court may order such appropriate relief as may be necessary to protect the trust property or the interests of the beneficiaries.
As stated, the court may remove a trustee for any of the reasons identified in N.J.S.A. 3B:14-21, ‘Removal For Cause,’ which reads in its entirety:
The court may remove a fiduciary from office when the fiduciary:
b. After due notice of any other order or judgment of the court made under its proper authority, neglects or refuses to perform or obey the order or judgment within the time fixed by the court;
c. Embezzles, wastes, or misapplies any part of the estate for which the fiduciary is responsible, or abuses the trust and confidence reposed in the fiduciary;
d. No longer resides nor has an office in the state and neglects or refuses to proceed with the administration of the estate and perform the duties required;
e. Is incapacitated for the transaction of business; or
f. Neglects or refuses, as one of two or more fiduciaries, to perform the required duties or to join with the other fiduciary or fiduciaries in the administration of the estate for which they are responsible whereby the proper administration and settlement of the estate is or may be hindered or prevented.
Removal of a Trustee is an “extraordinary remedy” that should only be “granted sparingly.” Discourse between a trustee and beneficiaries is not grounds for removal unless the relationship is likely to “interfere materially with the administration” of the trust. The mere fact that “a beneficiary disagrees with a trustee’s proper exercise of discretionary powers, or is resentful of the Trustee’s authority, or is antagonized by the trustee’s personality, is not sufficient to cause his removal.”
A judge should be particularly reluctant to remove a trustee who was chosen by the decedent, even where a chosen trustee is flawed. So long as the executor acts in “good faith, with ordinary discretion and within the scope of his powers, his acts cannot be successfully assailed.”
The foremost concern when removal is contemplated should be whether the trustee’s continued service would be detrimental to the trust. The applicant seeking removal must produce “competent evidence” demonstrating misconduct, or that continued retention of the trustee would endanger the trust or the welfare of the beneficiary.
However, when clear and definite proof of gross carelessness, indifference, or bad faith acts by the fiduciary have been evidenced, or that have diminished or endangered the trust even without bad faith, it is the duty of the court to remove him.