Foley Alabama Attorneys
(251) 444-7000

toll free 855.390.5566

How to Exclude a Beneficiary from a Trust in Alabama

Can a trustee remove a beneficiary from a trust? As experienced Alabama trust litigation attorneys, we get this question more often than you might imagine. When it comes from a trustee, it’s typically because they suspect that a beneficiary is stealing or mismanaging assets. It may also be due to other reasons like the beneficiary’s being of unsound mind or failing to meet specific conditions.

On the other hand, a beneficiary may ask this question because a trustee has threatened to remove them from the trust. This can be a scary position to be in, given the extensive powers of a trustee as set forth in Alabama Code § 19-3B-816.

Whether you’re a trustee or a beneficiary, it’s crucial to fully understand what the law says about situations like this. This will help you make informed decisions and ensure that you don’t do anything to complicate your case.

In this article, we’ve provided answers to the all-important question about the right (or lack thereof) of a trustee to remove a beneficiary.

Do Trustees Have the Power to Remove Beneficiaries from Trusts?

Understanding a Trustee’s Power to Remove a Trust Beneficiary

Whether a trustee can remove a beneficiary from a trust depends on the kind of trust it is. While a revocable trust may allow a trustee to change beneficiaries, they can’t do the same with irrevocable trusts.

Generally, when a trust is created, the grantor retains the right to make alterations to the trust as they wish. So, they can name the trustees and beneficiaries of the trust and change them at any time. All they need to do is to amend the trust to suit their current wishes.

Trustees are only created to manage the trust and ensure that its provisions are strictly adhered to. As such, they cannot indiscriminately make changes to the trust. However, while they don’t ordinarily have the power to remove beneficiaries, there are some exceptions to this rule. When it’s a revocable trust, these include:

  • When the grantor doubles as the trustee
  • If the grantor expressly permits the trustee to change beneficiaries in the trust document.
Foley, Alabama Lawyers

Revocable trusts, as the name implies, are subject to alterations as long as the grantor is alive and mentally competent. However, when a grantor dies, the trust becomes irrevocable.  A trustee cannot unilaterally remove a beneficiary from an irrevocable trust, even during the grantor’s lifetime.

Irrevocable trusts are made rigid to promote stability and prevent the trustee from making emotional decisions. With irrevocable trusts, there’s a guarantee that the grantor’s wishes will be adhered to even if they cannot oversee it anymore.

However, beneficiaries must note that a trustee is allowed to withhold their distribution for valid reasons. This includes when they believe that the beneficiary will squander it or is not mentally competent enough to handle their finances. Trustees may also delay distributions if an inherent condition has yet to be met.

How Can a Beneficiary Be Removed from a Trust?

Beneficiaries Can Choose to Exit a Trust by Their Own Free Will

Besides a grantor’s removing trust beneficiaries, they can decide to remove themselves from the trust. This can happen when the beneficiaries feel that they have no need for the assets to be distributed. In other cases, they may renounce their interest in the trust to avoid the tax implications.

Regardless of the reason behind their decision, beneficiaries who wish to exit a trust must inform the trustee. They may also require consent from the other beneficiaries of the trust to be removed. If you’re a beneficiary who wishes to exit a trust, it’s best to consult a qualified attorney before making up your mind.

Foley, Alabama Lawyers

An experienced trust litigation lawyer will review your case and inform you of your options to ensure that you’re making the right decision.

Can Beneficiaries Remove or Sue Trustees?

A Trust Beneficiary’s Right to Bring a Claim Against a Trustee

Beneficiaries can take legal action against a trustee in Alabama. However, it has to be for valid reasons, like having breached their fiduciary duty.

A fiduciary duty is the highest duty of care imposed by the law on any person. It mandates trustees to use their position to act in the best interests of the beneficiaries. They are to be honest, loyal, and diligent, to the point of putting the interests of the beneficiaries above their own.

Trustees can breach their fiduciary duty in many ways. For example, they may misrepresent facts to influence the beneficiary to take an action. It also constitutes a breach of duty when they make reckless investment decisions. Another common example is when a trustee steals from the trust.

When a trustee fails in their fiduciary duty, the beneficiary can sue them in furtherance of their rights to defend the trust assets. This action can lead to the trustee’s removal.

Sometimes, a grantor may expressly give beneficiaries the right to remove the trustee for specific reasons. If that’s your case, you can exercise your power to remove them following the provisions of the trust. For example, a provision may mandate that you should replace any trustee you remove with a professional trustee. You should endeavor to adhere strictly to such conditions. Another way a trustee can be removed is when all the trust beneficiaries agree to it.

What Happens When a Beneficiary Contests a Trust?

Consequences of Contesting a Trust

Trustees can, in some situations, leverage the fact that a beneficiary contested the trust to push for their removal. The law allows anyone with an interest in a trust, especially beneficiaries, to contest a trust wholly or in part. Common reasons for challenging a trust include allegations of undue influence, mental incapacity, and fraud. Beneficiaries may also contest a trust on the ground that the decedent mistakenly executed the trust.

Sometimes, a grantor may take certain steps to ensure that no one challenges the trust after their demise. For example, they may include a no-contest clause as part of the trust documents. A no-contest clause stops individuals from benefiting from a trust they contested. It’s to the effect that anyone who challenges the trust and fails will not inherit any asset in the trust.

However, if a beneficiary successfully contests a trust, asset distribution will be based on the provisions of a previous estate plan. If there is no previous estate plan, the trust assets will be included in the intestate estate.

Contact Our Trust Litigation Attorneys Now

Our Experienced Attorneys at Caldwell, Wenzel, & Asthana, PC, Fight to Protect Your Best Interests

When it comes to trust and estate planning in Alabama, things can go south in an instant. For example, there may be errors in the drafting of the trust document or disagreements among trustees and beneficiaries. Sometimes, these issues can be settled by mediation and mutual agreement. However, in highly contentious cases, parties may have no choice but to seek redress in court.

As experienced Alabama trust litigation lawyers, we understand how complex and overwhelming trust matters can be. Fortunately, with many years of successfully representing clients with similar cases, we’re confident of our abilities to help you, too.

We are a full-service trust litigation law firm. From trusted legal advice, to document drafting, to aggressive litigation, our attorneys come ready to help you achieve a positive outcome.

Foley, Alabama Lawyers

Call us now at (251) 444-7000 to request a free consultation.