General Law

How do I remove a trustee? – QLD

What is a trustee?

A trustee is the person in charge of the trust. They manage the trust’s assets, do business on behalf of the trust and distribute any income that an asset earns to the beneficiaries during the life of the trust. While a trust is a very common business structure in Australia, it can sometimes be difficult to determine if and how to remove a trustee.

Reasons you could remove a trustee

The reasons for removal of a trustee depend upon the trust documents and applicable state law. Generally, a trustee can be removed for the following reasons:

  • If they become incapacitated, whether due to medical issues or self-inflicted incapacity due to drug and alcohol abuse.
  • Violating the terms of the trust, such as not consulting with a co-trustee in a decision.
  • Failure to account or report as required by the beneficiaries.
  • Self-dealing and not acting in the best interest of the trust and the beneficiary. This includes selling trust property to themselves for a heavily discounted price.
  • Theft of trust property is a violation of the trustee’s fiduciary duties.

Removing a trustee does not necessarily need to be a result of misconduct either. Conflict between trustees may also be deemed a sufficient reason for a court to protect the beneficiaries of the trust. This, however, would very much depend on the specifics of your situation.

How do I remove a trustee?

Trustees can be removed by their fellow trustees without court intervention. If this is not successful, co-trustees can apply for an order to the court requesting the removal of the trustee in breach of their duties.

 A successful application to remove a trustee is typically supported by evidence showing as many of the following factors as possible:

·       the replacement of the trustee is necessary to protect the beneficiaries and secure the trust assets;

·       the current trustee(s) is unable or unwilling to carry out the necessary obligations of the office of trustee; and

·       the trustee has exercised powers in a manner unfair or prejudicial to all the beneficiaries or to at least some of them.

Each case will be considered by the Court on its own facts applying the rules which have evolved. Whilst serious breaches will almost inevitably result in a trustee being removed, less minor breaches may not. It is therefore important to seek legal advice early so you understand your options and what type of evidence you will need to support your case.

You should also consider in advance who the replacement trustee (if any) will be, and what that might cost the assets of the trust; for example, if a professional trustee is appointed.

Disclaimer

This information is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact experienced lawyers to discuss your personal circumstances.

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