Recent Pennsylvania Supreme Court Ruling on Removal of a Trustee
One of the key issues in preparing a trust is to insert language to allow for the removal and replacement of a trustee without judicial approval. Why? The Pennsylvania Supreme Court recently unanimously ruled that the Pennsylvania Uniform Trust Act (the “Act”) does not allow the removal of a trustee, even if all of the beneficiaries of the trust unanimously agree to the change, unless: (a) the language of the trust provides for such removal; or (b) such removal is approved by a court. In other words, the beneficiaries of a trust cannot remove or replace a trustee at their discretion absent court approval.
When the creator of a trust appoints a trustee, he or she must recognize that a financial institution that has existed for decades and they believed would exist for decades thereafter could be the next Lehman Brothers. Therefore, the creator of a trust must, in the trust itself, provide the beneficiaries with the ability to change the trustee if the beneficiaries unanimously agree.