Removal of a Trustee in Michigan: The Rules Are Clear

Law BooksWhen a trust fund is created, the trust documents name a trustee to administer the trust. Depending on the type of trust, the trustee’s responsibilities may begin immediately, or they may begin on the death or incapacity of the person creating the trust, referred to as the grantor or settlor. What happens if, at any point, someone becomes unhappy with how the trustee is performing his, her, or their responsibilities? Under Michigan law, reasons justifying removal of a trustee are very specific.

Trustee Responsibilities

Beneficiaries can become displeased with how a trustee is performing any of a wide range of responsibilities that are part of the trustee’s fiduciary duty, which include:

  • Locating, safeguarding, and inventorying all trust assets, including real estate; personal property, like household items; securities, such as stocks and bonds; bank accounts; life insurance policies; and retirement, profit-sharing, and deferred compensation accounts
  • Paying debts, expenses, and costs, as well as settling creditors’ claims
  • Keeping records of all transactions and disbursements
  • Communicating with and reporting to beneficiaries
  • Administering the trust, which may include investing assets
  • Distributing assets in accordance with the trust terms

In addition, Michigan law imposes other specific responsibilities on trustees, including: loyalty, impartiality when there is more than one beneficiary, care and prudence in administration, and separation of the trust assets from the trustee’s own assets.

Trustee Removal under Michigan Law

In some cases, the trust document itself may contain provisions relating to removal of trustees. If that is the case, a beneficiary may be able to proceed under the terms of the trust document. If the trust document does not include trustee removal provisions, or if those provisions are not adequate under the circumstances, Michigan law provides the only means of removing the trustee.

In 2010, the Michigan legislature passed a law specifically governing removal of trustees. In 2015, our trust litigation attorneys at BRMM won a landmark case in the Michigan Court of Appeals that applied and clarified the law.

The statute provides that only a grantor or settlor, co-trustee, or a qualified beneficiary may petition the probate court for removal of a trustee. A court can also remove a trustee on its own initiative. The Michigan law lists the following reasons for court removal of a trustee:

  • A serious breach of trust by the trustee
  • Impairment of trust administration on account of lack of cooperation among co-trustees
  • A court determination that removal best serves the purposes of the trust, because of a trustee’s unfitness, unwillingness, or persistent failure to administer the trust effectively

All these reasons are dependent on the specific facts and circumstances in an individual case, which a court will evaluate and weigh in deciding whether removal of the trustee is warranted.

Any violation of a duty owed to beneficiaries constitutes a breach of trust by the trustee. In event of a breach of trust, the court has broad discretion to order relief in addition to removal if necessary to protect the trust property or beneficiaries’ interests. A trustee also may be liable for damages for a breach of trust. The amount of damages is set by the statute as the greater of the loss in value of the trust property and distributions or the profit the trustee made on account of the breach.

In the Michigan Court of Appeals case in 2015, the court’s decision established that only the statutory grounds for removal of a trustee are available in Michigan and that reasons used to justify removal under prior common law and case law no longer apply. The decision also stated that allegations of hostility or bias, and the existence of other litigation between the trustee and beneficiaries, were not enough to warrant removal of the trustee, since there was no evidence that the trust or trust property were harmed and those asking for removal were not affected as beneficiaries.

Together, the Michigan statute and the Court of Appeals decision make it clear that, unless there are provisions in the trust document itself providing for removal of the trustee, the reasons for removing a trustee are limited to those permitted by the statute.

Our BRMM Attorneys Excel at Trust Litigation and Trust Administration

At BRMM, our attorneys excel not only at trust litigation but also at trust administration. We offer comprehensive estate planning and probate services for Michigan residents and those from out-of-state with an interest in a Michigan estate or trust. Our office is located in Troy, Michigan. Call us at 248.641.7070 or complete our online form to set up your free, confidential consultation.