Many people seem to think of being a trustee as being like having a job. But, in many ways, being a trustee is nothing like a job. The difference is particularly important when it comes to resigning. Quitting a job is often a matter of sending a resignation letter, whereas resigning as trustee can be significantly more complicated.
To resign, a trustee has to follow the terms of trust document or, if the trust doesn't provide a method, state law. The trust document might tell a trustee how to resign. It might, for example, say the trustee has to resign by sending written notice to the beneficiaries of the trust. If the trust doesn't say anything about resigning, that doesn't mean the trustee can choose the method. Rather, the trustee has to look to the laws of the state under which the trust is governed for instruction.
Virginia law provides a trustee with two methods for resigning:
- Give at least 30 days notice to the person who created the trust, to all co-trustees, and to the beneficiaries specified in the statute; or
- Seek the approval of the court.
§ 64.2-758 of the Virginia Code.
Years ago, Virginia law was not especially clear on whether a trustee could resign without court approval, and well-advised trustees obtained court approval of their resignations. In many states, trustees still have to obtain court approval to resign (unless the trust document provides another method). Even in states like Virginia, there are still situations in which it may be advisable for a trustee to seek the permission of the court to resign.
A trustee who fails to resign properly might still owe fiduciary duties to the beneficiaries. In other words, the trustee resignation may be partially or completely ineffective if not done properly. And a trustee who fails to do his/her job might be liable to the trust's beneficiaries for abandoning his/her duties.
Even when a trustee has properly resigned, he/she may still have certain duties and liability. For example, if a trustee's resignation would leave the trustee position vacant, the resigning trustee still has to fulfill many of the responsibilities of a trustee until an appropriate person can take over.
Ultimately, resigning as a trustee and quitting a job can be quite different.