Can You Remove a Beneficiary From a Trust in New York?

By the Law Offices of Albert Goodwin, New York trusts and estates attorneys

The answer depends on two things: what kind of trust you have, and who is trying to make the change. A grantor changing a revocable living trust is in a very different position from a trustee who wants to cut a sibling out of a parent's Medicaid trust. This page is organized around those situations.

Key terms

• Grantor: The person who created and funded the trust. New York statutes call this person the "creator." Some documents use "settlor."
• Trustee: The person or institution that manages the trust property under the terms of the document and owes fiduciary duties to the beneficiaries.
• Power of appointment: Authority, written into a trust, that lets a named person redirect trust property among a defined group of people. It is governed by EPTL Article 10.
• Power of attorney: A separate document in which a principal names an agent to act for the principal during the principal's lifetime. It is governed by General Obligations Law 5-1501 and following.

A power of appointment and a power of attorney are different instruments. They can connect only in a narrow way, explained below.

1. If you are the grantor of a revocable trust

The grantor of a revocable lifetime trust can generally amend or revoke it. Removing a beneficiary is a type of amendment. The trust document does not need a special clause giving you permission to drop a beneficiary. The power to amend comes from the fact that you made the trust revocable.

The formalities matter. Under EPTL 7-1.16 and 7-1.17, an amendment must be in writing and signed with the same formalities required to create a lifetime trust. That means it is acknowledged before a notary or witnessed by two witnesses, and signed by at least one trustee unless you are the sole trustee. If the trust document sets out its own method of amendment, follow it as well. A later will is generally not an effective way to amend a lifetime trust. Many people make that mistake, and it can leave the old beneficiary designation in place.

Practical points for grantors:

• Use a written amendment or a restatement: A restatement replaces the full text and is often cleaner when several changes have built up over the years.
• Check other documents: A will with a pour-over clause, beneficiary designations on retirement accounts, and jointly titled assets may still send property to the person you meant to remove.
• Capacity: You must have capacity when you sign. An amendment made late in life, especially one that cuts out a child, is a common target of litigation. Good records of your reasons and your condition at signing help.
• Agents under a power of attorney: An agent can amend or revoke your revocable trust only if the trust and the power of attorney both expressly allow it. Do not assume your agent has this authority.

For what belongs in a revocable trust in the first place, see assets that can and cannot go into a revocable trust and benefits of a living trust.

2. If you are the grantor of an irrevocable or Medicaid trust

An irrevocable trust cannot simply be amended at the grantor's wish. That is the point of making it irrevocable. A grantor who wants to remove a beneficiary has three main routes.

A reserved limited power of appointment

Many New York irrevocable trusts, and most Medicaid asset protection trusts, reserve a limited power of appointment to the grantor. This is a standard drafting feature, not an unusual one. A typical clause reads in part:

"The Grantor reserves the power, exercisable by written instrument delivered to the Trustees during the trust term, by making specific reference to, and exercise of, this power, to appoint any part or all of the principal of the remainder... to one or more persons selected out of a class composed of the Grantor's issue."

Read each part of a clause like this:

• Who holds the power: The grantor, not the trustee. A trustee who is not the grantor cannot use it.
• The permissible class: Here, the grantor's issue (children, grandchildren, and later descendants). The grantor can shift shares among issue, or leave a child out entirely, but cannot appoint to someone outside the class, such as a friend or a new spouse.
• How it is exercised: Some clauses allow exercise during life by a written instrument delivered to the trustees. Others allow exercise only by the grantor's will. Many allow both. The instrument must refer specifically to the power if the trust requires it. EPTL 10-6.1 gives effect to that kind of specific-reference requirement.
• Default takers: The clause names who receives the property if the power is never exercised. If the grantor does nothing, the default beneficiaries take.

Some trusts also say the lifetime power may be exercised by the grantor's agent under a power of attorney that grants gift authority. That authority exists only while the grantor is alive. An agent's authority ends at the principal's death under General Obligations Law 5-1511. After death, only a power exercisable by will survives, and only the grantor's own will can exercise it. Since June 2021, New York's statutory short form power of attorney handles gifting authority in its modifications section rather than a separate statutory gifts rider. Older trusts may still refer to a gifts rider.

Consent of all beneficiaries under EPTL 7-1.9

EPTL 7-1.9 allows the creator of a trust to revoke or amend it, in whole or in part, with the written consent of all persons beneficially interested in the trust. Each consent must be acknowledged in the form required for recording a deed. The limits are significant:

• Only the grantor can act under this section, so it is unavailable after the grantor's death.
• Every person with a beneficial interest must sign, including the beneficiary being removed. In practice that person rarely agrees.
• Minors, incapacitated persons, and unborn beneficiaries cannot give valid consent. If the trust includes them, as many trusts for "issue" do, this route may be closed without a court proceeding.
• Under EPTL 7-1.9(b), people described only as the grantor's heirs, next of kin, or distributees are not treated as beneficially interested for this purpose.

For a Medicaid trust, using 7-1.9 to return principal to the grantor would defeat the trust's purpose and could make the assets countable again. Many Medicaid trusts expressly prohibit any amendment that would benefit the grantor or the grantor's spouse.

A court proceeding

If the document contains a mistake, such as a drafting error that does not reflect what the grantor intended, a court may reform or construe it. A change of heart toward a beneficiary is not a mistake, and courts will not rewrite a trust for that reason alone.

Medicaid trusts: look-back, tax status, and why the power of appointment is drafted narrowly

In a New York Medicaid asset protection trust, the grantor gives up access to principal so that, after the look-back period, the principal is not counted for Medicaid eligibility. For nursing home Medicaid, the look-back is five years from the application date. Several features of these trusts interact with any attempt to change beneficiaries.

• The bar on appointing to the grantor or spouse: Medicaid trusts typically prohibit the grantor from appointing principal to the grantor, the grantor's spouse, their estates, or their creditors. If the grantor could appoint to any of these, Medicaid could treat the principal as available to the grantor. Under the Internal Revenue Code, a power exercisable in favor of oneself, one's estate, or creditors is a general power of appointment. The trust is drafted to avoid that.
• Shifting among children: Exercising a properly limited power to shift principal among the grantor's issue generally does not make the principal available to the grantor. For that reason, it does not by itself restart the look-back. You should still confirm this against the specific trust language before acting.
• Estate inclusion and step-up in basis: A retained limited power of appointment is one of the features that usually keeps the transfer an incomplete gift for gift tax purposes and causes the trust assets to be included in the grantor's estate for federal estate tax purposes. That inclusion lets beneficiaries receive a stepped-up income tax basis at the grantor's death under Internal Revenue Code Section 1014. For a house bought decades ago, the step-up can save the children significant capital gains tax.
• Grantor trust status: Most Medicaid trusts are drafted as grantor trusts for income tax purposes, so the grantor keeps reporting the income and keeps certain tax benefits, such as the capital gains exclusion on the sale of a primary residence. An amendment or decanting that removes the provisions creating this status can change the tax picture.
• Disclaimers by Medicaid recipients: If a beneficiary who receives or may need Medicaid disclaims an interest, Medicaid treats the disclaimer as a transfer of assets.

Any change to a Medicaid trust should be reviewed for Medicaid and tax effects before anyone signs. A change that works under trust law can still cause a penalty period or a lost step-up.

3. If you are the trustee

A trustee administers the trust as written. A trustee has no inherent power to remove a beneficiary or reduce a share because the trustee, or the grantor's family, disapproves of that person. A trustee who does this without authority commits a breach of trust and can be surcharged or removed. See breach of trust and breach of fiduciary duty.

The main statutory tool available to a trustee is decanting under EPTL 10-6.6. Decanting means distributing principal from the existing trust into a new trust with different terms.

• Unlimited discretion: If the trustee has unlimited discretion to distribute principal, the trustee may appoint principal to a new trust for one or more of the current beneficiaries, to the exclusion of others. The remainder beneficiaries of the new trust must come from the remainder beneficiaries of the original trust.
• Limited discretion: If the trustee's power to distribute principal is limited, for example by a standard such as health, education, maintenance, and support, the beneficiaries' interests in the new trust must be substantially similar to those in the original trust. Removing a beneficiary is generally not possible.
• Who may decant: The statute defines an "authorized trustee" in a way that generally excludes the trust's creator. A trustee who is also a beneficiary faces restrictions.
• Procedure: The decanting is made by a signed, acknowledged written instrument. Copies must be served on the grantor, if living, and on every person interested in the trust. The decanting takes effect no sooner than 30 days after service unless those persons consent in writing. The instrument is filed with the court that has jurisdiction over the trust, often the Surrogate's Court.
• Fiduciary duty still applies: The statute requires the trustee to exercise the power in the best interests of the beneficiaries and consistently with the grantor's intent. A decanting done to punish a beneficiary, or to benefit the trustee, is open to challenge.

A trustee who is asked by family members to cut someone out should get written legal advice before acting. A trustee can also ask the Surrogate's Court for instructions.

4. If you are another beneficiary or a family member

Beneficiaries cannot vote another beneficiary out of a trust. Your options are limited to the following:

• Disclaim your own interest: Under EPTL 2-1.11, a beneficiary can refuse an interest by a signed, acknowledged writing filed in the Surrogate's Court, generally within nine months after the interest is created, and before accepting any benefit. The disclaimed interest passes as if you had died first. You cannot direct who receives it, and a disclaimer cannot remove anyone else.
• Agree with the other beneficiaries: New York has not adopted the Uniform Trust Code and has no general statute for nonjudicial settlement agreements. Competent adult beneficiaries can sign agreements about how they will share or handle what they receive, and those agreements bind the people who sign. They do not bind minors, incapacitated persons, or unborn beneficiaries. Court approval is usually needed for those interests.
• Ask the court to construe or reform the trust: If the document is ambiguous or contains a provable drafting error, you can bring a construction or reformation proceeding. The Surrogate's Court has jurisdiction over lifetime trusts under SCPA 207. These cases are decided on the grantor's intent, not on fairness among siblings.
• Challenge an improper change: If you have been removed, you may be able to contest the amendment on grounds of lack of capacity, undue influence, fraud, or improper execution. You can also contest a trustee's decanting, or a power of appointment exercised outside the permitted class. See inheritance disputes and beneficiaries' rights to trust information.

5. After the grantor's death

At the grantor's death, a revocable trust becomes irrevocable and the beneficiary provisions are generally locked in. No one can amend it under EPTL 7-1.16, and EPTL 7-1.9 is unavailable because the grantor must be the one to act. Any power of attorney the grantor signed has ended.

What may remain:

• A power of appointment exercised by the grantor's will: If the trust reserved a testamentary power and the grantor's will properly exercised it, the will can redirect the remainder within the permitted class. The trustee carries out the exercise. The trustee does not create it.
• A power held by someone else: Some trusts give a surviving spouse or a child a power of appointment that continues after the grantor's death. That person can exercise it only as the document allows.
• Decanting, disclaimer, and court proceedings: These work as described above.

Frequently asked questions

I created an irrevocable trust and named myself trustee. Can I remove one of my children?

Not by acting as trustee. Look for a power of appointment reserved to you as grantor. If the trust reserves one that covers your issue, you may be able to exercise it, by a written instrument or by your will, depending on the clause. Without such a power, your options are EPTL 7-1.9 consent from every beneficiary, including the child you want to remove, or decanting by an independent trustee if the trust and statute allow it. If you are the grantor, you generally cannot decant as trustee.

I am the trustee of my parent's Medicaid trust. My parent is alive and upset with my sibling. Can I remove my sibling?

Not on your own authority as trustee. If the trust reserves a limited power of appointment to your parent, your parent can exercise it in the manner the trust requires, as long as the new allocation stays within the permitted class, usually the parent's issue. If the trust allows exercise by an agent, and your parent signed a power of attorney with the necessary gift authority, the agent may be able to exercise it during your parent's life. If you are both the agent and a beneficiary, that conflict needs careful handling and should be documented with legal advice.

Can a trustee appoint himself or herself as a beneficiary, or give a larger share to their own children?

No, unless the trust clearly authorizes it, and even then it is closely scrutinized. A trustee owes the beneficiaries a duty of undivided loyalty and must treat them impartially. The New York Court of Appeals enforced that duty strictly in Matter of Rothko, 43 N.Y.2d 305 (1977). Shifting trust property to yourself or your family without authority is a breach of trust that can lead to surcharge and removal.

Can a stepparent remove stepchildren from a trust?

Only if the stepparent holds a power that allows it. For example, a trust created by a deceased spouse may give the surviving spouse a limited power of appointment among the deceased spouse's issue. The survivor can then reallocate among those issue but cannot redirect the property to the survivor's own children unless they fall within the class the document permits. Absent such a power, a stepparent who is merely trustee or a co-beneficiary cannot remove anyone.

Is a trust amendment public?

Generally not. Trusts are not filed with a court unless a proceeding is brought. See are trusts public record.

Get advice before changing a trust

Removing a beneficiary can cause family litigation, Medicaid penalties, or tax costs if it is done the wrong way. Before anyone signs an amendment, an exercise of a power of appointment, or a decanting instrument, have the trust document reviewed. An attorney can give you a written opinion, prepare the instrument with the correct formalities, or seek instructions from the Surrogate's Court. Sometimes a different structure, such as holding a beneficiary's share in further trust, achieves the goal without removing anyone.

The Law Offices of Albert Goodwin handle trust drafting, administration, and disputes. Learn more about our New York trust practice. We have offices in New York City, Brooklyn, and Queens. Call 212-233-1233 or email [email protected].

This page provides general information about New York law and is not legal advice. Your result depends on the exact language of your trust and the facts of your situation.