Articles & Blog

Removal of Trustee

A well-written opinion from the Philadelphia Court of Common Pleas, Orphans Court Division was issued August 18, 2014, regarding removal of trustee (Edward Winslow Taylor, Inter vivos Trust, O.C. 3563 IV of 1939). The governing instrument provided that if the trustee resigned the settlor, if alive and able, may appoint a new trustee, and in the alternative the beneficiary may appoint the trustee.

The beneficiaries proposed to change that section of the governing instrument to allow the income beneficiaries, from time to time and without cause, to remove the corporate trustee and substitute another. The beneficiaries invoked section 7740.1 (general provisions for modification) of the Pennsylvania Estates and Fiduciaries Code (PEF) which provides that if not all the beneficiaries consent to a proposed modification of the trust that the modification may be approved by the court if the court is satisfied that if all the beneficiaries had consented the trust could be modified, and the interest of the beneficiary that did not consent will be adequately protected. The beneficiaries also cited the McKinney trust case (as discussed in our blog a couple weeks ago), but did not raise section 7766 of the PEF Code (specific provisions for removal of a trustee). The corporate trustee argued that section 7766 of the PEF Code was the proper statute to utilize as it specifically deals with the removal of trustee and provides that a beneficiary may request the court to remove the trustee under certain conditions.

The court reviewed the numerous factors that the Superior Court in the case of McKinney outlined for a court to analyze under section 7766, and concluded that the beneficiaries proposed none of those factors for review. The court further concluded that whenever a general provision in a statute is in conflict with a specific provision in a statute, then the specific statute shall prevail and be construed as an exception to the general provision (1 Pennsylvania, CSA, 1933).

The court denied the proposed modification of the beneficiaries.

Leave a Reply