San Diego Estate Planning Lawyer Blog
Sometimes a trustee of a trust has to be removed for a violation of his fiduciary duties. In California the Probate Code sets forth the various duties a trustee of a trust has to the beneficiaries. Some of these duties are the duty of loyalty, duty not to self deal, the duty to keep the beneficiaries informed, duty to act impartially, and the duty to use skill and care in administering the trust.
You may recall the late Dr. Atkins, the author and physician who created the Atkins diet. When he died in 2003, he left 90% of his estate to a Marital Trust for the benefit of his wife Veronica and the balance to his charitable foundation. Dr. Atkins had named three business associates to serve as co-trustees with his wife. The three business associates resigned their trusteeship within 9 months of Dr. Atkin’s death and were replaced with individuals who were named as beneficiaries in Veronica Atkins estate planning documents. Agreements were entered into with these co-trustees agreeing to pay them millions of dollars for trust administration. Mrs. Atkins was obligated to pay her co-trustees a minimum of $100,000 per month. In the first six months, two of the trustees were paid more than $1 million in fees. When Mrs. Atkins stopped paying them, they sued her for breach of contract.
Finally in 2007, Mrs. Atkins filed a petition to remove her co-trustees in a New York probate court. New York has similar codes to California which allow a trustee to be removed if they engage in a breach of their fiduciary duty or if hostility between the co-trustees or the trustees and the beneficiary impair the administration of the trust. In ruling that the trustees should be removed, the Court said when the trustees are chosen by the testator, the court is reluctant to remove a trustee but there was a clear showing of misconduct and a level of hostility between Mrs. Atkins and her co-trustees such it would affect the trust administration.
At Scott C. Soady, A Professional Corporation, we frequently have to petition the local probate court to remove a trustee or conversely, defend a client who is acting as a trustee and the beneficiaries are seeking to remove him. In either case, it is the type of trust litigation that requires you as a potential client to seek out experienced counsel. Contact us about probate or trust litigation or trust administration.