Probate & Trust Law Section Conference Manual ... - Minnesota CLE

C. Trust Construction
but that the trustee had the authority to determine the amount and timing
of distributions from the trust. The Court held that the authority of the
trustee was subordinate to the investment directors and the investment
directors had exclusive authority to determine disbursements to the
various subtrusts. The trust agreement also had an in terrorem clause.
The trustee also contested the ruling that the beneficiary had violated the
in terrorem clause contained in the trust agreement. The Court held that
the trustee did not have standing to challenge the in terrorem clause
because the trustee was not the party harmed by it. Finally, the trial court
had the authority to require the trustee to pay her own attorneys’ fees
because the litigation was constituted a breach of fiduciary duties.
1. Thorpe v. Reed, 150 Cal. Rptr. 3d 454 (Cal. Ct. App. 2012). Successor
trustee was not entitled to compensation if the terms of the trust
agreement provide that a successor trustee would not be compensated.
A young man was injured in two separate accidents. A special needs trust
was established to hold a home and funds from the resulting litigations.
The man’s mother was named as the trustee of the special needs trust.
Ultimately, the mother was replaced by the public guardian who served as
the temporary trustee. The public guardian was replaced by a professional
fiduciary who was appointed as the temporary successor trustee. After a
series of hearings and continuances, at which the family, the trust
beneficiary, and the public guardian all suggested that the conservatorship
was no longer necessary and that a family member could act as trustee, the
trial court appointed the professional fiduciary as the permanent trustee.
The trial court cited California Probate Code §§15642, subd. (e), and
17206 as authority for the court to award fees in spite of the specific
prohibition of fees to a successor trustee in the trust agreement, and,
accordingly, the trial court awarded fees to the professional fiduciary, in
its capacity as the successor trustee. The appellate court reversed the trial
court and held that there was no authority for a court to award fees to a
successor trustee who accepted appointment as trustee and acted in that
capacity, but did not have to accept the appointment if it did not want to
act because the trust agreement restricted or prohibited trustee
compensation.
2. Tait v. Community First Trust Company, 2012 Ark. 455 (2012). The
interests of the beneficiaries who predeceased the surviving settlor of
an inter vivos trust did not lapse upon the death of the beneficiaries. A
husband and wife created a joint revocable trust. The trust assets
consisted of three classes of property: (1) the husband’s separate property;
(2) the wife’s separate property; and (3) the couple’s joint property. The
trust agreement was revocable, but became irrevocable upon the death of
the first spouse. At the death of the surviving spouse, the remaining trust
assets would be distributed as follows: (1) the joint property and the
33