Case of First Impression Out of Pennsylvania: Is a No Fault Trustee Replacement Clause Valid in West Palm Beach?
Are you currently a beneficiary to a trust where the trustee is not performing up to your standards? Do you know how you can remove a trustee without showing a legal fault? Are you currently drafting a trust document in West Palm Beach? Have you considered adding a section for how to remove a trustee? What about a no fault removal clause? Do you know what this is?
No Fault Removal Clause
- Normally in order to remove a trustee a beneficiary will have to show fault.
- Examples include self dealing, imprudent investments, comingling of funds and anything else that just in general is not what a trustee should be doing.
- But experienced Palm Beach probate litigators know that sometimes you do not need fault to remove a trustee.
- This is done through a no fault removal clause.
- Do you think these are wise to put into a trust charter?
- Experienced Palm Beach probate litigators will tell you, it depends.
- How many beneficiaries will there be?
- Do you want them all to have the power to in fight and then go ahead and remove the trustee if he does not take their side?
- Also how is the trustee supposed to make distributions?
- Are they based on discretion rather than need?
- Do you really want beneficiaries to be able to remove a trustee when they disagree with his discretion?
- What do you think is the right choice to make sure your trust lasts as long as you want and is not absorbed in lawyers fees and trustee disputes?
- It is about balancing the purpose of the trust and a need for administrative efficiency.
- So is a no fault clause valid in Florida?
In re McKinney
- Beneficiaries of a testamentary trust and a descendant’s trust petitioned for the no-fault removal of a trustee after an alleged substantial change in circumstances.
- The change?
- The family had moved to a different state.
- Also several corporate mergers of original trust institutions lead to a different bank office being involved in the administration of the trust.
- The Pennsylvania Superior Court dealt with what it described as an area of first impression, meaning new law.
- They said that there was no need for a showing of harm if there was a no fault replacement clause.
- Does this holding seem dangerous?
- At one point is the beneficiary basically assuming the role of trustee if they can just fire anyone that they do not like?
- Will these broaden the expenses on the court in overseeing trusts or make it easier as the no fault means no need for court?
- Time will tell.
Want to read the whole case before you decide an opinion?