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    TRUSTS: Hostility Between Beneficiary and Trustee as Ground for Removal of Trustee

    Posted by D. Bradley Pettit on Tue, Mar 15, 2016 @ 13:03 PM

    The Lawletter Vol 41, No 3

    Brad Pettit, Senior Attorney, National Legal Research Group

         The Restatement of Trusts provides generally that "[a] trustee may be removed . . . for cause by a proper court." Restatement (Third) of Trusts § 37(b) (2003 & Westlaw database updated Oct. 2015) (emphasis added). The Comment to section 37 of the Restatement says that "[f]riction between the trustee and some of the beneficiaries [of a trust] is not a sufficient ground for removing the trustee unless it interferes with the proper administration of the trust." Id. § 37 cmt. e(1). Thus, although the "[b]eneficiaries may be resentful when property they expected to inherit is placed in trust, or of reasonable exercise of a trustee's discretion with regard to matters of administration or the alleged underperformance of the trustee's investment program[, s]uch resentment ordinarily does not warrant removal of the trustee." Id. "[B]ut a serious breakdown in communications between beneficiaries and a trustee may justify removal, particularly if the trustee is responsible for the breakdown or it appears to be incurable." Id.

         A leading treatise on trust law notes that "[d]isagreeable personal relations between the beneficiary [of a trust] and the trustee are frequently relied upon as grounds for removal [and] the mere fact that the beneficiary wants the trustee removed is not enough" to sustain a petition for removal of a trustee. George Gleason Bogert et al., The Law of Trusts and Trustees § 527 (Westlaw database updated Sept. 2015) (footnotes omitted). Thus, "[d]ifferences of opinion or unfriendliness" between a trust beneficiary and the trustee are "insufficient" grounds to support the removal of a trustee from office. Id. (footnotes omitted).

         The Restatement sets forth the following illustration of the circumstances under which a trustee can be removed on the ground of poor relations between the trustee and beneficiaries of a trust:

         The settlor named two of her five children as co-trustees of a trust for all of the children and their families. Over several years, extreme ill will has developed among the children and is now impairing the proper functioning of the trust. It is within the reasonable discretion of the court to remove and replace the trustees.

    Restatement § 37 cmt. e(1), illus. 7; id. § 37 reporter's notes cmt. e ("Illustration 7 is based on Matter of Guardianship of Brown, 436 N.E.2d 877 (Ind.App. 1982).").

         A New Jersey court ruled that "[w]here there is conduct by a fiduciary toward a beneficiary which causes mutual animosity between them, a court may invoke its equity powers to remove the trustee." In re Duke, 702 A.2d 1008, 1023 (N.J. Super. Ct. App. Div. 1995) (citations omitted), aff'd, 702 A.2d 1007 (N.J. Super. Ct. App. Div.), cert. denied, 697 A.2d 546 (N.J. 1997). But "[i]n order for hostility between a beneficiary and trustee to form the basis for removal, there must be evidence that the relationship is likely to materially interfere with the administration of the trust." Id.

         For additional discussion of cases that have addressed the issue of whether hostility between beneficiaries of a trust and the trustee is a ground for removal of the trustee, the reader is advised to consult C.R. McCorkle, Annotation, Hostility Between Trustee and Beneficiary as Ground for Removal, 63 A.L.R.2d 523 (1959 & Westlaw databases updated weekly).

         The authorities cited suggest that although state statutes do not expressly say that hostility between a beneficiary of a trust and the trustee can be a ground for removal of the trustee, there is both common law and secondary authority that stand for the proposition that animosity between a trust beneficiary and the trustee can, under certain limited circumstances, support a suit by the aggrieved beneficiary to remove the trustee.

    Topics: trusts, Brad Pettit, removal of trustee, hostility between trustee and beneficiary

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