In New York, an irrevocable trust is a trust that cannot be revoked or modified without either a court order or written consent from all parties involved (all trustees, beneficiaries and people who made the trust).

Is a New York Trust Revocable or Irrevocable by Default?

A New York trust is irrevocable by default.  NY EPTL § 7-1.16. However, it is still a good idea to not leave the issue hanging in the air and to instead specify if a trust is revocable or irrevocable.

Even an irrevocable trust is only irrevocable if there is no consent of all the parties involved. It can be revoked with a written consent of all the parties involved, including grantors, trustees and beneficiaries. If some of the parties are not available or are minors, contact a New York estate attorney.

Even a trust that is expressly stated to be revocable becomes irrevocable upon the death of the settlor/grantor, the person who made the trust.

Can You Revoke or Modify a New York Irrevocable Trust?

As life circumstances change, a trust may need to be changed or updated. But what happens if the trust is irrevocable? Does that mean that the trust can never be revoked or changed?

Most irrevocable trusts in New York have a work-around that allows them to be changed or modified, even if they are irrevocable. We would have to look at the language of the trust and other circumstances, but most irrevocable trusts have a way out that allows us to have them revoked.

Usually, we are able to either use one of the powers of the trustee to “decant” the trust, or transfer it to a different trust, or we are able to use consents of beneficiaries, trustees and grantors to modify the trust and resignations of trustees if a trustee needs to be changed.

If a trust does not have a way out, or one of the people involved does not agree to sign the consent to modify the trust, then the only way to modify the trust, if any, it through the court. An estate attorney can draft a petition explaining to the court the reasons why changes need to be made to the trust. If the person who is not agreeing to the modification submits an opposition to the trust modification. It is not easy to get the court to modify an irrevocable trust, especially if one of the people involved objects. It will be up to the judge to decide whether or not to grant the trust modification, based on the arguments presented by the respective estate lawyers.

If you need an attorney to deal with an irrevocable trust in New York, call Albert Goodwin, Esq. at 212-233-1233 or 718-509-9774.

Yes, a trustee can also be a beneficiary, and they often are. But in some types of trusts, a trustee cannot be a beneficiary.

Many trusts have the same people fulfilling multiple roles. As lawyers like to say, the same person can “wear many hats.” We often have the person who made the trust fulfill multiple roles, the same person can be the maker of the trust, the trustee and the beneficiary.

Let’s say John made a trust, becoming its first trustee and beneficiary. After John’s death, his son Tom becomes the trustee and beneficiary. That is a perfectly reasonable scenario.

However, although a trustee can also be a beneficiary in many types of trusts, for some types of trusts the rules about trustees and beneficiaries get more complicated and you would need to speak to a New York trust attorney to find out the details.

For example, in a Medicaid trust, the person who made the trust has limitations on becoming the trustee and beneficiary, so that the trust complies with Medicaid rules. As another example, in some spendthrift trusts, the trustee cannot be a beneficiary, so that creditors don’t have access to the principle of the trust.

As a beneficiary, the beneficiary-trustee is entitled to distributions of trust assets if the trust authorizes such distributions. Here are some examples of the different types of trust distribution arrangements for beneficiaries:

• An immediate distribution upon the death of the person who made the trust
• An immediate distribution upon reaching a certain age (for example, 18 or 25)
• A distribution of principal
• A distribution of income
• A monthly distribution
• A distribution in some point in time

Just like any other trustee, the beneficiary trustee has a duty of utmost fiduciary responsibility to the other beneficiaries of the trust. Just like any other trustee, a trustee-beneficiary is not supposed to intermingle his assets with estate assets, withdraw funds from the trust for his own use not in accordance with trust terms and steal from the other beneficiaries of the trust in any way. When a trustee takes money from the trust that they are not supposed to take, that’s called stealing even though some of the money they took ultimately belong to them. For example, a man left a trust for his four children, and one of the children is a trustee. Can the trustee-child withdraw cash from the trust and say that he is just withdrawing his own cash? The answer to that is absolutely not. Even though the trustee is one of the beneficiaries of the trust, at the end of the day the trust is not his. The trust belongs to all the beneficiaries. So if a trustee uses the trust’s money for his own needs in any way or transfers trust money to himself, he is considered by the law to be taking everyone’s money, not just his own. As an example, if he takes four thousand dollars, he is not taking four thousand dollars of his own money. He is stealing a thousand dollars from each of his siblings. If he takes a penny, most of that penny belongs to the other beneficiaries of the trust.

What can happen if a trustee who is the beneficiary neglects good advice and does withdraw cash from the trust account? Nothing good. The trustee can be removed by the court. The court will force the trustee to return the money. The court might order the trustee to pay for his own attorneys’ fees as opposed to using trust funds to pay for his attorney’s fees. The judge may even order the trustee to pay the beneficiaries’ attorneys’ fees. What is scarier is that the trustee can even be criminally prosecuted for stealing. That’s right, a criminal prosecution even if the trustee is one of the beneficiaries of the trust and even if the amount he took is less than his stake in the trust account. The judge can refer the case to the District Attorney’s office, which has the power to prosecute the case in criminal court, although that rarely happens.

To sum up, in some trusts a trustee can also be a beneficiary, and in some trusts that cannot be done. And always remember that whether a beneficiary or not, a trustee has to always be careful to follow fiduciary rules of the trust.

If you need the services of a New York trust attorney, you can send us an email at [email protected] or call us at 718-509-9774.

A beneficiary is entitled to a distribution of trust assets if the trust authorizes such distribution. Here are some examples of the different types of trust distribution arrangements for beneficiaries:

• An immediate distribution upon the death of the person who made the trust
• An immediate distribution upon reaching a certain age (for example, 18 or 25)
• A distribution of principal
• A distribution of income
• A monthly distribution
• A distribution at some specific point in time

Keep in mind that the possibility of distribution of trust assets to beneficiaries might not be the same in every trust – some trusts authorize distribution to beneficiaries, some do not. You would have to have an attorney read the trust document to find out for sure, presuming that the trust document is not unclear (as some are). Some beneficiaries are entitled to distribution of assets, some are entitled only to distribution of income, and some are not entitled to any distribution, possibly for a long time. Some beneficiaries are not entitled to any distribution at all, such as contingent beneficiaries.

Every month of delay of distribution of trust assets costs the beneficiary loss of use and enjoyment of their share of the trust. If the trustee is taking too long, a trust attorney can go a long way in showing them that distributing the trust to the beneficiaries should be a priority.

As we said, a distribution to beneficiaries of a trust depends on the trust language. If you don’t have a copy of the trust, you can ask the trustee to provide a copy of the trust to you. If the trustee refuses, you can bring a court proceeding to compel the production of a trust.

On one hand, it is understandable that the trustee has many things they have to get to. On the other hand, a diligent beneficiary should not sit by idly for this entire temporal period, especially if he believes that a trustee is failing the nonwaivable duty to “exercise reasonable care, diligence, and prudence.”^[1] For example, a court may disqualify a trustee on grounds such as commingling funds, mismanagement, dishonesty, and substance abuse.^[2]

New York courts and will step in if the trustee “endangers the trust” or “seriously impedes its administration.”^[3] If the trustee is non-responsive, a beneficiary can send a written demand to the trustee for an accounting and distribution of trust assets to beneficiaries. This request serves two purposes. First, it may be a requirement to commence any proceeding in court against the trustee.^[4] And second, it gives the trustee notice that you are serious—which may give way to a faster distribution. If the trustee does not respond to this written demand, the beneficiary may then commence a motion to compel accounting with the court.^[5] New York courts generally compel such an accounting if it’s for good cause.

It is a fine line between giving the trustee deference and desiring to receive the inheritance promptly. When a beneficiary knows that a trustee is mishandling the trust, a court should immediately get involved. In many cases, however, a quarrel with the trustee is not in the best interests of either the beneficiary or the trust. Therefore, it is best to discuss distribution of trust assets to a beneficiary with a competent New York trust attorney.

Call the Law Offices of Albert Goodwin at (212) 233-1233 or (718) 509-9774 and make an appointment to discuss your rights regarding your share of the trust.

———————————————————————————————-

References

[1] N.Y. Est. Powers & Trusts Law § 11-1.7(a)(1).

[2] N.Y. Surr. Ct. Proc. Act Law § 711.

[3] In re Braloff, 162 N.Y.S.2d 620, 623 (2d Dep’t 1957), affirmed, 173 N.Y.S.2d 817 (1958).

[4] N.Y. Surr. Ct. Proc. Act Law § 2102(1).

[5] See id.§ 2205, 2206.

While the majority of trustees handle trust administration timely and adequately, there are times where a trustee refuses to act. There are steps that you can take to hurry the trustee along and protect your interest in a trust. You are entitled to a full accounting of the trust’s assets and to the timely distribution of the trust’s assets.

Through compelling a trustee to provide a full accounting and fulfill the bequests in the trust, a New York trust attorney can help you protect your rights.

Organizational Delays

It may take some time for the trustee to figure out what the trust needs him to do, hire an attorney and come up with a game-plan.

Delays in Marshaling Assets

Before the trustee can distribute assets, the trustee has to find the assets first. If the decedent did not leave a detailed list of the assets in the trust, then the trustee will have to perform multiple searches.

• Look through the decedent’s documents
• Find decedent’s safe deposit boxes
• Search for real estate
• Search for other assets

As long as the trustee is performing their duties, they are not refusing to act, even if they are not yet ready to distribute the assets.

Litigation Delays

If there is litigation involved, then there could be a more extended period going by before you can collect your inheritance. Different types of litigation can affect a trust.

• A medical malpractice claim
• A business dispute
• Real estate eviction
• The validity of the decedent’s will
• The qualification of the trustee

Litigation can add years to a trust proceeding and may give an impression that the trustee is refusing to act.

If the Trustee Refuses to Act

Once a few months have passed and the trustee is still not releasing money or property left by the trust, then the trustee may be refusing to act.

We would first file a petition or an accounting of a trust, to get an idea of what the trustee is claiming is left for distribution. If there are disagreements over what is in the trust, we resolve those disagreements before moving on to the distribution stage.

Once the accounting is resolved, we file a petition to compel a distribution, to ask the court to force the trustee to stop refusing to act and to release the inheritance. This law is meant to protect you from a trustee who either is lax in handling their duties or is purposefully refusing to distribute the inheritance. The law lets you ask the court through a New York trust attorney to force the trustee to turn over property that you are entitled to.

If you would like to know more about your options when the trustee is refusing to act, you can call the Law Offices of Albert Goodwin at (212) 233-1233. You are welcome to make an appointment to discuss your situation.

Jimmy found out that his favorite aunt, Linda, made him a beneficiary of her trust prior to her passing. Jimmy waited patiently for the trustee to do what has to be done and distribute his share of the trust. Reasoning that Linda would have wanted him to do so, Jimmy decided to splurge on an expensive vacation. Yet, the trust’s trustee is not distributing Linda’s inheritance. With his credit card bills piling up, Jimmy started to reach the trustee for periodic updates. The trustee replied “hopefully soon” to the first email, but stopped responding to the subsequent ones. Is there anything that Jimmy can do to speed things up?

A situation as described above is not uncommon. The beneficiaries obviously desire to receive their share of the trust as soon as possible. But possible is not always soon.

On one hand, it is understandable that the trustee has things to do. On the other hand, a diligent beneficiary should not sit by idly for this entire temporal period, especially if he believes that an trustee is failing the nonwaivable duty to “exercise reasonable care, diligence, and prudence.”^[5] For example, a court may disqualify an trustee on grounds such as commingling funds, mismanagement, dishonesty, and substance abuse.^[6] Although, New York courts will generally give a long leash, and will only step in if the trustee “endanger[ed] the trust” or “seriously impede[d] its administration.”^[7] If the trustee is non-responsive, however, a beneficiary should send a written demand for an accounting. This request serves two purposes. First, it may be a requirement to commence any proceeding in court against the trustee.^[8] And second, it gives the trustee notice that you are serious—which may give way to a faster distribution. If the trustee does not respond to this written demand, the beneficiary may then commence a motion to compel accounting with the court.^[9] Although even here, the New York courts generally compel such an accounting only for good cause.^[10]

It is a fine line between giving the trustee deference and desiring to receive the inheritance promptly. When a beneficiary knows that a trustee is mishandling the trust, a court should immediately get involved. In many cases, however, a quarrel with the trustee is not in the best interests for either the beneficiary or the trust. Therefore, it is best for a beneficiary, like Jimmy, to discuss such matters with a competent New York trust attorney.

Call the Law Offices of Albert Goodwin at (212) 233-1233 or (718) 509-9774 and make an appointment to discuss your rights regarding your share of the trust.

—

[1] N.Y. Est. Powers & Trusts Law § 11-1.5 (McKinney 2018). This excludes the statutory exclusion of up to $25,000 from the trust for a surviving spouse or children under twenty-one. Id§ 5-3.1.

[2] N.Y. Surr. Ct. Proc. Act Law § 1802 (McKinney 2018); N.Y. Est. Powers & Trusts Law § 11-1.5(c).

[3] 26 U.S.C. § 2204 (2012); N.Y. Tax Law § 972 (McKinney 2018).

[4] Frequently Asked Questions on Trust Taxes: When can I expect an Trust Tax Closing Letter?,IRS, https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-trust-taxes#1 (last updated May 11, 2018).

[5] N.Y. Est. Powers & Trusts Law § 11-1.7(a)(1).

[6] N.Y. Surr. Ct. Proc. Act Law § 711.

[7] In re Braloff, 162 N.Y.S.2d 620, 623 (2d Dep’t 1957), affirmed, 173 N.Y.S.2d 817 (1958).

[8] N.Y. Surr. Ct. Proc. Act Law § 2102(1).

[9] See id.§ 2205, 2206.

[10] See, e.g., In re Sherburne, 464 N.Y.S.2d 531, 531 (1983) (holding that in a proceeding in which it was determined that trustees did not have authority to sell decedent’s home, ordering trustees to render and file a final account was appropriate exercise of discretion).

Beneficiaries of a trust have the right to:

• • • Receive current and truthful information about the trust
    • Get the entire share of the trust that they are entitled to
    • Receive a timely distribution of their share of the trust
    • Compel the trustee to provide a formal judicial accounting
    • Have the court remove a trustee who is using the trust for their own gain

Information About the Trust

If the trustee is not giving you information about the trust when asked, they may be hiding something. If you have that suspicion, it’s best to consult with a New York trust attorney. We might send them a letter on your behalf, explaining that you have rights and that failure to provide information can result in the removal of the trustee from the trust.

The Entire Share of the Trust

It does not matter how the Trustee feels about it. The trust is not their personal property or business. They are just there to do a job – to find all of the assets of the trust and promptly distribute the assets to creditors and beneficiaries of the decedent. The trustee cannot keep any of it or give it away to their friends or relatives. They are only entitled to commissions and their own share as a beneficiary.

Rights of Beneficiaries to Receive a Timely Distribution of  Their Share

Every month of delay costs the beneficiary loss of use and enjoyment of their share of the trust. If the trustee is taking too long, a trust attorney can go a long way in showing them that distributing the trust to the beneficiaries should be a priority.

Inventory of the Trust

Beneficiaries have the right to receive an Inventory of the trust (not to be confused with a formal accounting) within nine months of the appointment of the trustee of the trust. An Inventory is something that should just be filed – the beneficiary should not have to ask for it. Some trustees s make a mistake of just filing the Inventory with the Court and not automatically sending a copy to the beneficiaries. It’s always a good idea to ask the trustee for an inventory before deciding whether or not to proceed to the next step.

Rights of Beneficiaries to Compel a Trust Accounting

A trust accounting is a document that details every transaction that occurred in the trust and provides some summaries and explanations of the transactions. The document consists of various schedules in a court-approved format and complying with general accounting standards. At a minimum, the trust accounting includes schedules listing line by line all of the assets that are a part of the trust, all of the expenses of the trust, all income of the trust, and proposed distributions of the trust.

Trustees s of a trust do not have an automatic obligation to file an accounting of the trust. But once the beneficiaries request an accounting, in many trusts trustees have to provide one.

If a beneficiary and a trustee agree to an informal accounting, it might work, as long as the beneficiary is satisfied, they have all the information. When a trustee files an informal accounting, they don’t have to file it with the court. They can just provide it to the beneficiaries. A trustee may ask a beneficiary to approve an informal accounting before the trustee makes distributions of trust funds.

If the beneficiary is not satisfied with an informal accounting, they can ask for a formal accounting. If the trustee fails to provide one, the beneficiaries can compel the trustee to provide one. If the trustee is ordered by the court to provide an accounting, they usually do or get removed by the court. Sometimes they provide an incomplete or fraudulent accounting. Beneficiaries can sue to challenge those accountings and get the money that the trustee may be keeping from the beneficiaries.

If you are looking for a New York trust attorney who protects the rights of beneficiaries of a New York trust, you can call Albert Goodwin, Esq. at (212) 233-1233.

A power of appointment in a trust allows the person with that power to appoint a beneficiary to the trust, as well as to take out existing beneficiaries.

The power of appointment can be exercised by the person with that power either in writing to the trustee or in a validly executed will. Typically, a trust will describe how its power of appointment works.

If the language of the trust is not clear, then the way the power of appointment works is by default as described in NY Estates Powers and Trusts Law, NY Est Pow & Trusts L § 10-6.6. A trustee may give the power of appointment to themselves or to someone else. Typically, we find that a trustee gives a power of appointment to their spouse, to keep the kids in check.

If you wish to consult with an attorney about a power of appointment in a trust, you can send us an email at [email protected]

Question: I’m a trustee for my mother’s or father’s irrevocable Medicaid trust. My mother or father are still alive, and they are upset at one of my brothers or sisters. Can they have that beneficiary removed from the trust or diminish their share?

Answer: The law does not give the trustee an automatic power to have a beneficiary removed from a trust. However, if a trust grants a trustee an option to exercise a power of attorney with a gift rider and the power of appointment to have a beneficiary appointed or have a beneficiary removed if the appropriate language is contained in the trust, then it’s possible.

The trust wording to allow the trustee to have a beneficiary removed from the trust is something similar to this:

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 of the trust fund at the end of the trust term, outright, or upon trusts, powers of appointment, conditions, or limitations, to one or more persons select out of a class composed of the Grantor’s issue. This power may be exercised by an agent under a duly executed statutory power of attorney and statutory gift rider.

The Grantor shall designate in the Grantor’s Last Will and Testament or any codicil thereto of any date, by making specific reference to, and exercise of, this power to appoint the remainder of the trust, in such amounts and proportions, for such estates and interests and free of trust or upon such terms, trusts, conditions, and limitations as Grantor may designate thereunder, to any one or more of Grantor’s issue.

In the event the Grantor shall fail to effectively exercise this power of appointment, then the remainder of the trust shall be assigned, transferred, and paid over as follows:

A Medicaid trust would also include a language such as this: The Grantors are prohibited from appointing themselves, each other, their estate, their creditors or creditors of their estate, their spouse, spouse’s estate, spouse’s creditors or creditors of spouse’s estate as beneficiaries of this trust.

In a trust, there can be either a limited power of appointment or a general power of appointment. Some trusts, especially irrevocable Medicaid trusts, are limited as to what kind of power of appointment it can contain.

This power of appointment with a gift rider is not a common thing to see in New York. We sometimes see it in a trust when a spouse gives the other spouse the power of appointment in order to keep their joint children in check. We also see situations where a stepmother or stepfather wants to have the stepchildren removed from the trust, in order to favor their own children. One has to be very careful before they decide to put a power of appointment into a trust, as it can have consequences such as their children being left out of the trust.

If you have a legal issue where a power of appointment in a trust is involved, you can call the Law Offices of Albert Goodwin at (212) 233-1233 or (718) 509-9774.

A beneficiary cannot be removed from a trust, with some rare exceptions, which we are going to cover here. The terms of a trust are governed by the trust document. A typical trust document spans dozens of pages. If a trust does not expressly state that the beneficiary can be removed from the trust, then the trustee is out of luck.

The reason people set up trusts is to control who benefits from their property after their death. Not to give a different person that control.

It is possible in a trust to give someone a power to remove a beneficiary. This could be done by granting the trustee a power of attorney with a gift rider and an option to exercise a power of appointment to appoint a new beneficiary and remove the old beneficiary. You can see a situation where this would come in handy.

Question 1: I set up an irrevocable trust with myself as the trustee. I make my children the beneficiaries of the trust. I am upset at one of the children. As the trustee, can I have that beneficiary removed from the trust?

Answer: If your trust includes a language that allows the Grantee (you) the power of appointment to remove a beneficiary, then you can have the beneficiary removed from the trust.

Question 2: I’m a trustee for my mother’s or father’s irrevocable Medicaid trust. My mother or father are still alive, and they are upset at one of my brothers or sisters. Can they have that beneficiary removed from the trust or diminish their share?

Answer: The law does not give the trustee an automatic power to have a beneficiary removed from a trust. However, if a trust grants a trustee an option to exercise a power of attorney with a gift rider and the power of appointment to have a beneficiary appointed or have a beneficiary removed if the appropriate language is contained in the trust, then it’s possible.

The trust wording to allow the trustee to have a beneficiary removed from the trust is something similar to this:

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 of the trust fund at the end of the trust term, outright, or upon trusts, powers of appointment, conditions, or limitations, to one or more persons select out of a class composed of the Grantor’s issue. This power may be exercised by an agent under a duly executed statutory power of attorney and statutory gift rider.

The Grantor shall designate in the Grantor’s Last Will and Testament or any codicil thereto of any date, by making specific reference to, and exercise of, this power to appoint the remainder of the trust, in such amounts and proportions, for such estates and interests and free of trust or upon such terms, trusts, conditions, and limitations as Grantor may designate thereunder, to any one or more of Grantor’s issue.

In the event the Grantor shall fail to effectively exercise this power of appointment, then the remainder of the trust shall be assigned, transferred, and paid over as follows:

A Medicaid trust would also include a language such as this: The Grantors are prohibited from appointing themselves, each other, their estate, their creditors or creditors of their estate, their spouse, spouse’s estate, spouse’s creditors or creditors of spouse’s estate as beneficiaries of this trust.

This power of appointment with a gift rider is not a common thing to see in New York. We sometimes see it in a trust when a spouse gives the other spouse the power of appointment in order to keep their joint children in check. We also see situations where a stepmother or stepfather wants to have the stepchildren removed from the trust, in order to favor their own children.

Question 3: I am a trustee of a trust. Can I make my children or myself the beneficiaries and have the current beneficiaries removed from the trust?

Answer: Appointing yourself would be not allowed in most cases, as it would be self-dealing and in contradiction to the law of trusts.

Can a trustee have a beneficiary removed from a revocable trust? If the trustee is also the grantor of the trust, then the grantor could terminate the trust and execute a new trust, changing the beneficiaries, even if the trust does not expressly allow that. This is not true in an irrevocable trust. Also, a revocable trust becomes irrevocable after the death of the grantor, so changing the trust, including removing beneficiaries, becomes more difficult after the grantor dies. However, if the trust includes a power of appointment to have the trustee exercise a power of attorney to remove a beneficiary from the trust, then the trustee has that power even after the death of the grantee after the trust became irrevocable.

New York Consolidated Laws, Estates, Powers and Trusts Law – EPT § 11-1.6 states that “Every fiduciary shall keep property received as fiduciary separate from his individual property.  He shall not invest or deposit such property with any corporation or other person doing business under the banking law, or with any other person or institution, in his own name, but all transactions by him affecting such property shall be in his name as fiduciary.” ^[1]

New York’s Penal Law (the Criminal Law) states that “A person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof.” ^[2]

An issue of a trustee having a beneficiary removed from the trust is a very sensitive situation, and you should not act on it without retaining an attorney to provide a letter of advice or obtain a court decision. An attorney can also help a trustee work out a compromise to achieve some of their goals without reverting to having a beneficiary removed. My name is Albert Goodwin and I am a New York wills, trusts and estates attorney. I can be reached at (212) 233-1233 or (718) 509-9774.

[1] NY EPTL § 11-1.6

[2] NY PEN § 155.05

Can a trustee remove a beneficiary from a trust? It depends on the language of the trust. If a trust states that it’s irrevocable and does not expressly give the trustee the power to remove a beneficiary, then the trustee cannot do so.

Irrevocable Trust. Most irrevocable trusts do not give the grantor or the trustee the power to remove a beneficiary.

Revocable Trust. A trustee can remove beneficiaries from the revocable trust if the trust expressly states that the trustee can do so. If the trustee is the person who contributed the money to the trust, then the trustee may have the power to revoke the trust, which essentially has the effect of removing the beneficiary. A revocable trust becomes an irrevocable trust upon the death of the grantor (the person who funded the trust), so even if the trustee might have had the power to remove a beneficiary during the grantor’s life, that power ceases to exist upon the grantor’s death.

Power of Appointment. A trustee cannot remove a beneficiary of an irrevocable trust unless the trust has a reserved power of appointment which allows the trustee to remove or change beneficiaries.

With a reserved power of appointment, it is possible in a trust to give someone a power to remove a beneficiary. This could be done by granting the trustee a power of attorney with a gift rider and an option to exercise a power of appointment to appoint a new beneficiary and remove the old beneficiary. You can see a situation where this would come in handy.

The terms of a trust are governed by the trust document. A typical trust document spans about a dozen pages. If a trust is irrevocable and does not expressly give the trustee the power to remove a beneficiary, then the trustee is out of luck.

The reasoning behind a limitation on the removal of beneficiary is reason people set up trusts in the first place. Trusts are set up to control what happens to their property after a person’s death. Not to give a different person that control.

If you are looking to consult with an attorney regarding can a trustee remove a beneficiary from a trust, you can send us an email at [email protected].

I’ve set up an irrevocable trust with myself as the trustee. I made my children the beneficiaries of the trust. Now I am upset at one of the children. As the trustee, can I remove that beneficiary child from the trust?

If your trust includes a language that allows the trustee (you) the power of appointment to remove a beneficiary, then you can do so. If the trust is revocable, you can revoke it. Otherwise, no.

I’m a trustee for my mother’s or father’s irrevocable Medicaid trust. My mother or father are still alive, and they are upset at one of my brothers or sisters. Can I remove that beneficiary from the trust or diminish their share?

The law does not give the trustee an automatic power to remove a beneficiary from a trust. However, if a trust grants a trustee an option to exercise a power of attorney with a gift rider and the power of appointment to appoint a beneficiary or remove a beneficiary language is contained in the trust, then it’s possible.

The trust wording to allow the trustee to remove a beneficiary from the trust is something similar to this:

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 of the trust fund at the end of the trust term, outright, or upon trusts, powers of appointment, conditions, or limitations, to one or more persons select out of a class composed of the Grantor’s issue. This power may be exercised by an agent under a duly executed statutory power of attorney and statutory gift rider.

The Grantor shall designate in the Grantor’s Last Will and Testament or any codicil thereto of any date, by making specific reference to, and exercise of, this power to appoint the remainder of the trust, in such amounts and proportions, for such estates and interests and free of trust or upon such terms, trusts, conditions, and limitations as Grantor may designate thereunder, to any one or more of Grantor’s issue.

In the event the Grantor shall fail to effectively exercise this power of appointment, then the remainder of the trust shall be assigned, transferred, and paid over as follows:

A Medicaid trust would also include a language such as this: The Grantors are prohibited from appointing themselves, each other, their estate, their creditors or creditors of their estate, their spouse, spouse’s estate, spouse’s creditors or creditors of spouse’s estate as beneficiaries of this trust.

This power of appointment with a gift rider is not a common thing to see in New York. We sometimes see it in a trust when a spouse gives the other spouse the power of appointment in order to keep their joint children in check. We also see situations where a stepmother or stepfather wants to remove their stepchildren from a trust, in order to favor their own children.

I am a trustee of a trust. Can I make my children or myself the beneficiaries and remove the current beneficiaries from the trust?

Appointing yourself would be not allowed in most cases, as it would be self-dealing and in contradiction to the law of trusts.

Can a trustee remove a beneficiary from a revocable trust?

If the trustee is also the grantor of the trust, then the grantor could terminate the trust and execute a new trust, changing the beneficiaries, even if the trust does not expressly allow that. This is not true in an irrevocable trust. Also, a revocable trust becomes irrevocable after the death of the grantor, so changing the trust, including removing beneficiaries, becomes more difficult after the grantor dies. However, if the trust includes a power of appointment to have the trustee exercise a power of attorney to remove a beneficiary from the trust, then the trustee has that power even after the death of the grantee after the trust became irrevocable.

New York Consolidated Laws, Estates, Powers and Trusts Law – EPT § 11-1.6 states that “Every fiduciary shall keep property received as fiduciary separate from his individual property.  He shall not invest or deposit such property with any corporation or other person doing business under the banking law, or with any other person or institution, in his own name, but all transactions by him affecting such property shall be in his name as fiduciary.” ^[1]

New York’s Penal Law (the Criminal Law) states that “A person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof.” ^[2]

An issue of a trustee removing a beneficiary from the trust is a very sensitive situation, and you should not act on it without retaining an attorney to provide a letter of advice or obtain a court decision. An attorney can also help a trustee work out a compromise to achieve some of their goals without reverting to removing beneficiaries.

We at the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at [email protected].

[1] NY EPTL § 11-1.6

[2] NY PEN § 155.05