The legal issue of “portability” (changing the corporate trustee of a trust, either by resignation or by removal and replacement) continues to evolve in Pennsylvania. Our clients frequently ask us about their ability to change the trustee of trusts that were created long ago. Many of these old trusts did not contain language allowing for the removal and replacement of trustees, because the individuals creating the trusts named their small, trusted financial institutions and did not contemplate multiple bank mergers that were to follow.
As we have written previously (Trust & Investment Perspectives, Fall 2013), in cases where trust documents governed by Pennsylvania law do not contain portability language, pursuant to Pennsylvania’s version of the Uniform Trust Act (the “Act”), all beneficiaries and trustees of a trust may enter into an agreement (without court approval) to allow for the resignation or appointment of a trustee, such as Pennsylvania Trust, as long as the change does not violate a material purpose of the trust.
The more challenging situation—one that is in the midst of appeals in Pennsylvania Courts—is when beneficiaries of trusts that lack portability language would like to replace corporate trustees that refuse to resign. Last September, the Pennsylvania Superior Court issued an opinion in Edward Winslow Taylor, Intervivos Trust that, on its face, gave hope to beneficiaries in this situation.
In Taylor, the Superior Court reversed a Philadelphia Orphans’ Court decision that denied a petition to modify a 1928 trust that named a long-extinct trust company to include portability language that would allow the beneficiaries to remove and replace the corporate trustee. Notably, the petition did not request the removal of the corporate trustee (currently Wells Fargo, by a lengthy succession of mergers). Nevertheless, the Orphans’ Court imputed removal as the beneficiaries’ motive, and—citing a separate section of the Act that specifically addressed removal of trustees—stated that the petitioners did not meet the statutory burden for removal, even though the petitioners had not asked for removal!
The beneficiaries appealed this decision, which resulted in the Superior Court’s reversal of the Orphans’ Court, with the Superior Court soundly rejecting the Orphans’ Court’s reasoning by stating that “[the beneficiaries] did not seek currently to remove Wells Fargo as trustee. Rather, [they] requested strictly to amend the trust to provide the flexibility to allow the beneficiaries to remove the trustee if, at some future point, they saw fit to do so. By imputing motives to the Appellants based on assumptions not supported by the record, the court engaged in inappropriate speculation and conjecture and based its finding on a false premise.” To the delight of beneficiaries stuck with uncooperative corporate trustees, the decision paved the way for the addition of portability language to Pennsylvania trusts regardless of the trustee’s position.
Wells Fargo immediately filed an appeal to the Pennsylvania Supreme Court which, in April of this year, agreed to review the case. Unfortunately for unhappy beneficiaries, the applicable law remains in flux until the Supreme Court issues a decision.
Pennsylvania Trust will continue to closely monitor the proceedings in Taylor. In the meantime, your Pennsylvania Trust administrator is happy to discuss these issues and answer questions you have about portability in new or old trust documents.
by Peter J. Johnson, Esq.
Peter J. Johnson is Senior Vice President and head of the Special Needs Trust/Guardianship Unit.
Disclosure: Data is for informational purposes only and should not be considered as marketing for any Pennsylvania Trust mandate or service and should not be considered a solicitation or an offer to provide any Pennsylvania Trust service in any jurisdiction where it would be unlawful to do so. The views expressed represent the opinions of Pennsylvania Trust and are not intended as a forecast or guarantee of future results. The sectors, industries, countries and regions discussed herein should not be perceived as investment recommendations and may no longer be held in an account’s portfolio. It should not be assumed that investments in any sector, industry, country or region discussed were or will prove profitable. Sector/industry weights and country and regional allocations of any particular client may vary based on investment restrictions applicable to the account. There may be additional risks associated with international investments. International securities may be subject to market/currency fluctuations, investment risks, and other risks involving foreign economic, political, monetary, taxation, auditing and other legal factors. These risks may be magnified in emerging markets. Pennsylvania Trust believes that transactions in any option, future, commodity, or other derivative product are not suitable for all persons, and that accordingly, clients should be aware of the risks involved in trading such instruments. There may be significant risks which should be considered prior to investing. All securities trading, whether in stocks, options or other investment vehicles, is speculative in nature and involves substantial risk of loss. Indices are unmanaged and not available for direct investment. Past performance is no guarantee of future results.