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How Do You Remove A Trustee From A Trust In Michigan?

by | Sep 18, 2020 | Wills, Trusts And Estates |


A grantor or settlor will select a trustee that he or she is confident will carry out the terms of the trust and treat the beneficiaries fairly.  However, it might turn out that the trustee is too incompetent to carry out his or her duties, mishandles trust assets or may even deliberately act to deprive a beneficiary to what he or she might be entitled to.  Michigan law has very specific circumstances under which a trustee may be removed and is also specific regarding who has standing to petition for such removal.  Trustees and beneficiaries alike should be aware of their responsibilities before they stand to lose a lot of time and money.

Only “[t]he settlor, a cotrustee, or a qualified trust beneficiary may request the court to remove a trustee, or a trustee may be removed by the court on its own initiative.”  MCL 700.7706(1).  This definition excludes spouses, heirs or creditors UNLESS they are also a settlor, cotrustee or qualified trust beneficiary.  The probate court may act sua sponte and remove a trustee on its own motion.

However, a trustee may ONLY be removed if one or more of the following occur:

  • “The trustee commits a serious breach of trust.” MCL 700.7706(2)(a).
  • “Lack of cooperation among cotrustees substantially impairs the administration of the trust.” MCL 700.7706(2)(b).
  • “Because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the purposes of the trust.” MCL 700.7706(2)(c).
  • “There has been a substantial change of circumstances, the court finds that removal of the trustee best serves the interests of the trust beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable cotrustee or successor trustee is available.” MCL 700.7706(2)(d).

The statutory bases for removing a trustee supersede any common law bases for removing a trustee before April 1, 2010 (the effective date of the Michigan Trust Code).  For example, conflicts of interests or hostility between trustees and/or beneficiaries are NOT grounds to remove a trustee unless the administration of the trust was affected.  In re Pollack Trust, 309 Mich App 125; 867 NW2d 884 (2015).  A careful reading of the statute shows that a minor violation of trust terms will not remove a trustee unless it amounts to a “serious” breach of trust.  A tardy notice, a late inventory or an accounting error will not be enough to remove someone from office.  However, wrongfully embezzling trust funds or materially violating the terms of the trust (e.g. refusing to make distributions to a named beneficiary) will certainly result in a petition and removal by the court.

The judge has a variety of options at his or her disposal when presented with mismanagement or malfeasance in office.  In addition to (or in lieu of) removal, if the trustee does breach a duty owed to a trust beneficiary, then the probate court can do any of the following:

  • Compel the trustee to perform the trustee’s duties. MCL 700.7901(2)(a).
  • Enjoin the trustee from committing a breach of trust. MCL 700.7901(2)(b).
  • Compel the trustee to redress a breach of trust by paying money, restoring property, or other means. MCL 700.7901(2)(c).
  • Order a trustee to account. MCL 700.7901(2)(d).
  • Appoint a special fiduciary to take possession of the trust property and administer the trust. MCL 700.7901(2)(e).
  • Suspend the trustee. MCL 700.7901(2)(f).
  • Reduce or deny compensation to the trustee. MCL 700.7901(2)(h).
  • Void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds. MCL 700.7901(2)(i).
  • Order any other appropriate relief. MCL 700.7901(2)(j).

Co-trustees should note that removal from office for lack of cooperation does not depend on a co-trustee actually breaching the trust.  In Banfield Irrevocable Trust, unpublished per curiam opinion of the Court of Appeals issued May 24, 2016 (Docket Nos. 321204, 325422), the Michigan Court of Appeals found that co-trustees were properly removed from office despite not breaching fiduciary duty.  The co-trustees were making decisions independent of each other without consultation, despite objections by the remaining beneficiaries, and that another co-trustee independently hired an attorney and paid $80,000.00 in fees without measurable benefit.  The Court of Appeals held it was not necessary for the probate court to find any breach of fiduciary duty by any trustee or whether the trustee was acting in their discretion as long as there was a finding of lack of cooperation that impaired trust administration.  In short, it is enough to be removed for not getting along so long as it was preventing the trust terms from being carried out.

The removal of a trustee remains an extraordinary remedy that probate courts will grant only if other statutory remedies are unsuccessful.  Here are examples where courts have refused to remove trustees under MCL 700.7706:

  • In re Stockton Trust, unpublished per curiam opinion of the Court of Appeals issued Sept. 19, 2017 (Docket No. 332278) – The probate court did not err in refusing to remove a trustee that pursued a conversion suit that proved unsuccessful and resulted in additional expense to the trust. The Court of Appeals determined there was no breach of trust where the trustee pursued the litigation in good faith and the attorney conducted a proper investigation before filing suit, even though the outcome did not result in a recovery.  Losing a case does not necessarily mean that the litigation was frivolous.
  • In re Franzel Irrevocable Trust, unpublished per curiam opinion of the Court of Appeals issued March 20, 2018 (Docket No. 335447) – The probate court did not err in refusing to remove a trustee who failed to keep a beneficiary’s share of funds separate in a trust created under his name (per trust terms). The Court of Appeals determined that this minor violation of trust terms did not amount to a serious breach because the trustee still held the beneficiary’s share separate for his benefit even if a separate trust wasn’t actually created.
  • In re Poston Trust, unpublished per curiam opinion of the Court of Appeals issued July 25th, 2017 (Docket No. 331772) – The probate court did not err in refusing to remove a trustee that engaged in self-dealing and failed to properly account for transactions (the judge instead denied a trustee fee for those dealings). The Court of Appeals found the sanction to be appropriate in lieu of removal because the trustee’s actions did not result in loss of trust funds and engaged in said transactions on the advice of other beneficiaries and a financial advisor.

Most trusts permit the trustee to retain and employ an attorney at the expense of the trust to advise and help carry out their administrative duties.  It is wise to take advantage of these provisions since trust law is complicated and there are many opportunities for things to go wrong.  Likewise, trust beneficiaries may consult with legal counsel to determine if they have valid grounds to remove the trustee.  If the removal was successful, probate courts can award attorney fees to the trust beneficiaries from trust assets if the judge believes the litigation was beneficial to the trust.  There is no substitute to meeting with a knowledgeable probate lawyer to be advised of your rights.

If you have any questions about trusts, trust administration or need legal representation as a settlor, trustee or beneficiary, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak for assistance today.


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