Uniform Trust Code Section 706 permits the removal of a trustee under specific circumstances, such as (1) commission of a serious breach of trust or (2) where removal is requested by all of the qualified beneficiaries, but only if a court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust. This last circumstance, (2), is known as “no fault removal” because it permits removal of the trustee even though the trustee has not committed a breach of trust. However, no fault removal requires all of the qualified beneficiaries to agree to request the removal. (We have previously looked at a case out of Pennsylvania, In Re McKinney, in which the court applied the no fault removal provision to remove a trustee.)
But, assuming that a trustee has not committed a breach of fiduciary duty, what if all of the qualified beneficiaries do not agree to request removal of the trustee. Do trust beneficiaries have any other avenues to remove a trustee?
EDWARD WINSLOW TAYLOR, IRREVOCABLE TRUST
In an “end around” Uniform Trust Code Section 706, the beneficiaries in another case out of Pennsylvania, used the trust modification provision of Uniform Trust Code Section 411 to remove a trustee. Uniform Trust Code Section 411 provides that a trust may be modified upon consent of the beneficiaries if a court concludes that modification is not inconsistent with a material purpose of the trust.
In Edward Winslow Taylor, Irrevocable Trust, three of the four beneficiaries of a trust established in 1928 brought suit to modify the trust agreement. The 1928 trust agreement did not contain a clause which provided the beneficiaries with the power to remove the trustee, who at the time of suit was Wells Fargo. In their suit, the beneficiaries sought to modify the trust to add a trustee removal provision. In an opinion handed down on September 18, 2015, the Superior Court of Pennsylvania, an intermediate appellate court, granted the beneficiaries’ request to modify the trust agreement and a trustee removal provision was added which gave the beneficiaries the power to remove the trustee.
Wells Fargo has appealed the decision of the Superior Court. On April 12, 2016, the Supreme Court of Pennsylvania granted Wells Fargo’s Petition to Appeal. In a possible tip of its hat, the Supreme Court’s Order granting the Petition of Appeal states that the issue presented is “whether the Superior Court erred in holding that trust beneficiaries may circumvent the requirements for removal of a trustee in [Pennsylvania’s trustee removal statute] by amending the Trust under[Pennsylvania’s trust modification statute].” By using the verb “circumvent,” the author of the Supreme Court’s Order granting Wells Fargo’s Petition to Appeal may have tipped his or her hat that the decision of the Superior Court is likely to be reversed.