Beneficiary relief against a disinterested or hostile Colorado trustee
Assume these or similar scenarios:
Years ago your ancestor created a trust, and named the local bank as trustee. The local bank has been sold and merged since. The new bank is not local. It has no trust officer who knows the trust beneficiaries, or cares about much but the bank’s bottom line. The bank doesn’t dislike the trust beneficiaries, it just does not care about them much.
The trustee charges way too much for doing very little, and refuses to move trust assets to a place they might earn more income.
What can be done?
The first place to start is with the trust itself. Does it provide for replacement of the trustee? Does it name a substitute trustee, or is there no named alternate? Is the trustee complying with the intent of the person who created the trust? Once you clearly understand the document itself …
a) You can ask the trustee to resign. This may not be bloody likely to happen, but ask anyway. The odds the trustee will resign are higher if every beneficiary agrees there needs to be a replacement.
b) You can petition the probate court to remove the trustee. This is most likely to succeed if the trustee has shown hostility to beneficiaries, or is breaching some duty. A bank’s simple lack of interest in the people involved, shown by delay or refusal of beneficiary special requests, is not generally a reason for Colorado courts to replace a trustee.
c) Reform the trust. If every beneficiary agrees, it may be possible to re-write the trust and provide for a new trustee. Colorado has statutes for reformation of a will or trust. Reformation means to change the original document. There are no limits on what can be changed. One statute says, “The court may reform the terms of a governing instrument, even if unambiguous, to conform the terms to the transferor’s intention if it is proved by clear and convincing evidence that the transferor’s intent and the terms of the governing instrument were affected by a mistake of fact or law.”
d) Sue the trustee for breach of fiduciary duty. Colorado has a statute entitled, “Fiduciary Oversight, Removal, Sanction and Contempt”. That statute allows probate judges broad authority to set trusts right and even to award damages to those harmed by trustee malfeasance.