Removing and Suing a Trustee in Michigan: A Litigation Guide for Beneficiaries

When a parent or loved one sets up a trust, they rely on a designated trustee to manage and distribute their hard-earned assets fairly and responsibly. Unfortunately, the person or bank appointed to this role does not always live up to their fiduciary duties. For beneficiaries, dealing with a rogue, unresponsive, or openly hostile trustee is incredibly stressful. Unlike a standard probate process where a judge automatically oversees the executor, trusts are designed to be administered privately. This means that if a trustee goes off the rails, the court will not step in unless a beneficiary files a formal lawsuit.

Understanding your rights under the Michigan Trust Code (MTC) is essential. You do not have to sit back and watch your inheritance be drained by exorbitant fees or reckless investments. The law provides powerful tools to demand transparency, force distributions, and ultimately remove a bad trustee from power. Because trust litigation is highly complex, partnering with an experienced local attorney from our directory can help you navigate the process and protect your family's legacy.

The Michigan Trust Code Rules for Trustee Removal

In Michigan, removing a trustee requires more than just a personal disagreement. You must prove to a probate judge that the trustee has breached their fiduciary duty or that their removal is necessary to protect the trust property. The specific grounds for removal are outlined in Mich. Comp. Laws § 700.7706. Under this statute, the court may remove a trustee if they commit a serious breach of trust, if there is a lack of cooperation among co-trustees that impairs the administration, or if the trustee simply fails to administer the trust effectively.

Bank and Corporate Trustees Charging Excessive Fees

Many trusts are managed by large corporate entities or banks. While they offer professional management, corporate trustees are notorious for charging exorbitant annual administration fees while providing minimal personal communication. If a corporate trustee's fees drastically outweigh the actual work being performed, or if they are bleeding a small trust dry through minimum fee schedules, beneficiaries can petition the court for removal or modification of the fee structure. The court will evaluate whether the fees are reasonable relative to the complexity and size of the trust estate.

Family Member Trustees Refusing to Distribute Funds

Often, the creator of the trust appoints a sibling, step-parent, or family friend as the trustee. This frequently leads to severe conflicts of interest, especially if the trustee is also a beneficiary. A common scenario involves a family member trustee who stubbornly refuses to make mandatory or discretionary distributions, hoarding the funds out of spite or greed. If the trust document states that funds shall be distributed for a beneficiary's 'health, education, maintenance, and support' (HEMS standard), and the trustee denies legitimate requests for medical bills or tuition, they are actively breaching their fiduciary duty.

Suing for Bad Investments (Breach of the Prudent Investor Rule)

Trustees cannot just gamble with trust money or leave it sitting in a non-interest-bearing checking account for years. Under the Michigan Prudent Investor Rule, codified at Mich. Comp. Laws § 700.1502, a trustee must invest and manage trust assets as a prudent investor would, exercising reasonable care, skill, and caution. If a trustee invests heavily in speculative crypto-currencies, sinks all the funds into their own failing business, or fails to diversify a heavily concentrated stock portfolio, beneficiaries can sue them for the resulting financial losses through a process called 'surcharge.'

Hostility Between Trustee and Beneficiary

Can you remove a trustee just because you hate each other? Generally, standard friction is not enough. However, if the hostility actively prevents the trust from being administered properly, the court will intervene. Precedents like In re Gerald L. Pollack Trust, 309 Mich. App. 125 (MI Court of Appeals 2015) demonstrate that when extreme hostility, bias, or a complete breakdown in communication jeopardizes the trust's purpose, a Michigan probate judge can order the immediate removal of the trustee to protect the beneficiaries' interests.

How to Demand a Formal Trust Accounting

The first step in any trust dispute is finding out exactly where the money went. Michigan law requires trustees to keep beneficiaries reasonably informed and to provide an annual accounting of the trust's assets, liabilities, receipts, and disbursements. If your trustee refuses to provide bank statements or a clear accounting, your attorney can file a Form PC 586, Michigan, Probate Court, Petition and Order to compel them to produce the financial records. Often, this petition is filed in a local venue such as the Wayne County Probate Court, Detroit or the Oakland County Probate Court, Pontiac.

Legal Fees: Can the Trustee Use Trust Funds to Defend Themselves?

One of the most frustrating aspects of trust litigation is the issue of legal fees. Under Mich. Comp. Laws § 700.7904, a trustee is generally allowed to use trust funds to pay their attorney when defending against a beneficiary's lawsuit. However, this is not an absolute right. If your attorney can prove to the judge that the trustee committed a blatant breach of trust or acted in bad faith, the court can order the trustee to repay those legal fees back to the trust out of their own personal pocket.

How Long Does Trust Litigation Take?

A simple petition to compel an accounting might be resolved in 2 to 4 months. However, if you are attempting to fully remove a trustee, force them to pay back lost funds (surcharge), and appoint a successor, the litigation process typically takes 9 to 18 months in Michigan. The timeline depends heavily on the court's docket and whether the trustee aggressively fights the removal.

Frequently Asked Questions (FAQ)