Trustee Resignation and Appointment

A trustee's right to resign his position is not absolute. The trustee's resignation must be authorized by the trust document or state law, and a trustee can face civil liability for failing to fulfill his duties under the law. The appointment of a successor trustee is governed by the trust document if it contains such a provision or by state law if it does not.

A trustee may resign in accordance with provisions spelled out in the trust. State laws vary somewhat concerning the resignation of a trustee in the absence of a specific procedure outlined in the trust. The Uniform Trust Code, adopted by 21 states, allows a trustee to resign on 30 days notice to the trust grantor, all qualified beneficiaries and all co-trustees. Of course, notice need not be given to the grantor if he is deceased, and notice need never be given to certain non-qualified beneficiaries, such as unborn children. Alternately, a trustee may resign at any time with the court’s approval. A court may authorize the trustee's resignation if he is ill, has filed for bankruptcy, or if he has been accused of misconduct and wishes to resign rather than face removal. A court may require a resigning trustee to account for trust property or post a bond to protect trust property.

A trustee must have reached the age of majority in the state where the trust was created (18 in most states). He must be capable of owning and transferring property, meaning that he must not have been declared legally incompetent by a court (due to mental illness, for example). A trustee may be an individual or a legal entity such as a bank. He must accept the appointment, and he may be required to sign a trust deed or other documents. Some states require a trustee to post a bond and take an oath of office.

Read More: Removing a Successor Trustee

The terms of the trust document govern the selection of a successor trustee if the issue is addressed. Many trusts name an alternate trustee who is authorized to take over the administrative responsibilities in the event that the trustee resigns, dies, goes bankrupt or is removed. Some trusts name a "trust protector" whose sole function is to hire and fire trustees.

The Uniform Trust Code requires the appointment of the party named in the trust deed if he is available and qualified. If he is not, second priority goes to a party unanimously approved by the qualified beneficiaries. If they cannot agree, a court may appoint a successor trustee. For a charitable trust, however, second priority goes to the party nominated by the charitable organization acting as beneficiary of the trust, as long as the state attorney general consents to the appointment.