Under what circumstances can a beneficiary challenge the trustee’s appointment or capacity? – North Carolina Probate Guide

Detailed Answer

North Carolina law gives beneficiaries several avenues to question whether the right person is serving as trustee or whether the current trustee should continue. Below is a plain-English review of the most common scenarios—drawn from Chapter 36C of the North Carolina Uniform Trust Code (UTC).

1. Challenging the Initial Appointment

• Defective Trust Instrument. If the trust document was forged, signed under duress, or executed when the settlor lacked capacity, a beneficiary can petition the Clerk of Superior Court to invalidate the appointment. See N.C. Gen. Stat. § 36C-4-406.
• Improper Method of Appointment. Some trusts name a third party (e.g., the corporate parent of the family business) to select the trustee. If that third party failed to follow the required procedure, beneficiaries can challenge the appointment under § 36C-7-701.
• Disqualification under the Trust Code. A person who is under 18, an adjudicated incompetent, or a convicted felon for crimes of dishonesty may be disqualified. See § 36C-7-703.

2. Removing a Sitting Trustee

Once a trustee has accepted the role, beneficiaries can seek removal for any of the grounds listed in § 36C-7-706:

1. Serious or repeated breach of trust. Mismanaging investments, self-dealing, or failing to provide required accountings.
2. Lack of cooperation among co-trustees substantially impairing administration.
3. Unfitness, unwillingness, or persistent failure to administer the trust effectively.
4. Substantial change in circumstances or request by all qualified beneficiaries and removal best serves beneficiary interests and is not inconsistent with a material purpose of the trust.

3. Trustee Incapacity

If a trustee becomes mentally or physically unable to perform fiduciary duties, beneficiaries may petition for removal and appointment of a successor under § 36C-7-704 and § 36C-7-705. Medical evidence—such as a doctor’s affidavit—usually supports the petition.

4. Procedural Steps to Challenge

1. Standing. Any “qualified beneficiary” (one who is entitled or may become entitled to receive trust income or principal) may file. § 36C-1-103.
2. Venue. File a verified petition with the Clerk of Superior Court in the county where the trust is administered. § 36C-2-203.
3. Notice. Serve the trustee and all other qualified beneficiaries. The court may require additional service methods if addresses are unknown.
4. Evidence. Bring financial records, trust accountings, correspondence, or medical reports to prove the stated grounds.
5. Court Order. If removal is granted, the court will appoint a successor named in the trust or, if none, a suitable person or corporate fiduciary. § 36C-7-706(c).

5. Hypothetical Example

Imagine a revocable living trust created by “Mary,” naming her nephew John as trustee at Mary’s death. After Mary dies, beneficiaries discover John pled guilty to embezzlement last year and has not provided an accounting. Two beneficiaries petition the Wake County Clerk under § 36C-7-706. They attach John’s criminal judgment and bank statements showing unexplained withdrawals. The Clerk finds a serious breach and removes John, appointing a local bank as successor trustee.

Helpful Hints

• Gather written proof before filing; courts dismiss vague accusations.
• Ask the trustee in writing for an accounting first—failure to comply strengthens your petition.
• North Carolina allows recovery of attorney fees from the trust if removal benefits the trust.
• File quickly; delay can let a bad trustee deplete assets.
• Consider mediation—many trust disputes settle faster and cheaper outside court.

Need Guidance?

If you suspect the wrong person is running a North Carolina trust, quick action protects the assets and your inheritance. Our firm’s probate attorneys have years of experience removing unfit trustees and safeguarding beneficiaries’ rights. Call us today at (919) 341-7055 for a confidential consultation.