The trustee can't typically remove a beneficiary from a trust, except under two circumstances: when the trustee is also the grantor of their revocable living trust, or the trust document explicitly grants these rights to the trustee.
A trustee is the person or company that manages the trust, maintains trust assets, and distributes them according to the terms set by the grantor (also known as the settlor). The trustee has a legal obligation, or fiduciary duty, to act in the trust's best interest according to the terms of the trust agreement. If they unlawfully try to remove a beneficiary they can be removed as trustee and even sued in court for failing to fulfill their obligations.
A trustee has a fiduciary duty to follow the terms of the trust document
When the trustee is also the grantor, such as with a revocable living trust, they can remove a beneficiary at their discretion
Can a trustee remove a beneficiary from a trust?
With a revocable living trust, the grantor has the power to amend the trust, including who the named beneficiary is. The grantor typically acts as trustee, too, so in this set up the grantor-trustee can change the beneficiaries up until the time of their death.
Upon the grantor's death, their revocable trust becomes irrevocable. The successor trustee takes over and manages the trust assets. The only circumstances in which the trustee, including a successor trustee, of the irrevocable trust could remove a beneficiary is if the grantor permitted them in writing.
Learn about the difference between a beneficiary and trustee.
Removing trust beneficiary with power of appointment
You can remove a trust beneficiary by changing the terms of the trust document. The trustee can remove a beneficiary only if they have been explicitly granted the right, or power of appointment to add and remove beneficiaries in the trust agreement. This is not a standard or common clause that's included in a straightforward trust. A trust, after all, is typically created as a controlled way to transfer assets to your chosen beneficiaries. If it were simple for someone like the trustee to remove beneficiaries at their discretion, a trust wouldn't be a very good estate planning tool.
Learn more about distributing trust assets to beneficiaries.
With certain types of trusts, it’s not unusual for a surviving spouse to be granted additional rights or powers of appointment that allow them to change how trust property is distributed — which can effectively change the trust beneficiary. For example, a grantor may open a marital trust that gives the surviving spouse (current beneficiary) a right to trust income as well as the right to choose how assets are finally distributed among their children (remainder beneficiaries). The surviving spouse is not the trustee; someone else appointed by the grantor continues to oversee the trust.
If you want to set up a trust that grants someone, whether the trustee or a beneficiary, with certain powers of appointment, you may want to consult with an estate planning attorney to make sure the trust is constructed properly according to your state trust law.