PRINTER'S NO. 4291
No. 3113 Session of 1994
INTRODUCED BY MANDERINO, CURRY, MELIO, CESSAR, HERSHEY,
MIHALICH, ROBINSON, LAUB, TIGUE, HENNESSEY, SAURMAN,
SCRIMENTI, BURNS, LAUGHLIN, BELFANTI, JOSEPHS, PETRONE,
WASHINGTON, KASUNIC, ROONEY, GODSHALL, FLICK AND YOUNGBLOOD,
OCTOBER 4, 1994
REFERRED TO COMMITTEE ON JUDICIARY, OCTOBER 4, 1994
AN ACT
1 Amending Title 20 (Decedents, Estates and Fiduciaries) of the
2 Pennsylvania Consolidated Statutes, providing for the removal
3 and replacement of a corporate or individual trustee.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Title 20 of the Pennsylvania Consolidated
7 Statutes is amended by adding a section to read:
8 § 7122. Removal and replacement of corporate or individual
9 trustee.
10 (a) Court approval necessary to replace.--Upon petition by
11 the sui juris beneficiaries of a trust for removal of an
12 incumbent trustee (corporate or individual) a vote shall be
13 taken in which each income beneficiary casts two votes and each
14 remainderman casts one vote. A simple majority shall rule; ties
15 shall be resolved in favor of the income beneficiaries. If a
16 majority votes in favor of removal, a court of common pleas
17 shall approve the appointment of a special disinterested
1 individual trustee.
2 (b) Powers of special trustee.--
3 (1) The appointed special trustee shall have the power
4 to:
5 (i) Remove a corporate trustee of the trust,
6 whenever created, and replace it with another corporate
7 trustee.
8 (ii) Remove an individual trustee of the trust,
9 whenever created, and replace him with another individual
10 trustee.
11 (iii) Remove a corporate trustee of the trust,
12 whenever created, and replace it with an individual
13 trustee or remove an individual trustee of the trust,
14 whenever created, and replace him with a corporate
15 trustee.
16 (2) The appointed special trustee may act under
17 paragraph (1) whether or not grounds exist for removal under
18 section 7121 (relating to grounds and procedure) upon
19 determining any of the following conditions has occurred to
20 interfere with trust objectives or to jeopardize trust
21 interests:
22 (i) The working relationship between the trustee and
23 the petitioners has become sufficiently impaired.
24 (ii) Trustee compensation is sufficiently excessive.
25 (iii) Administrative or investment performance has
26 been sufficiently substandard.
27 (c) Limitations on replacement petitions and surcharge
28 petitions.--
29 (1) No individual appointed as a replacement trustee
30 shall exercise a power to make any discretionary distribution
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1 either of principal or income to himself, make discretionary
2 allocations in his own favor of receipts or expenses as
3 between principal versus income, or make any discretionary
4 distribution in satisfaction of any legal obligation imposed
5 upon him.
6 (2) No more than two removal proceedings with respect to
7 a corporate trustee and two removal proceedings with respect
8 to an individual trustee for a trust may take place under
9 this section within any given five-year period subsequent to
10 the enactment of this act.
11 (3) An ancillary surcharge petition may be filed by the
12 petitioner no later than 60 days following the transfer of
13 the trust assets to the replacement trustee.
14 (d) Representation.--If there are no sui juris beneficiaries
15 or if the remainder interests of all sui juris beneficiaries may
16 be modified or eliminated by the exercise of another
17 petitioner's power of appointment, the court of common pleas
18 shall appoint a guardian or trustee ad litem or shall specify
19 representatives to represent the remainder interests. The
20 Attorney General shall represent all charitable organizations
21 having an interest in the trust regardless of whether they are
22 represented by their own counsel.
23 (e) Substantial change in ownership or management of
24 corporate trustee.--Any argument made against removal of a
25 trustee which is based on a presumption that the trust creator
26 had special confidence in the trustee may be rebutted by a
27 showing of substantial change of ownership or management of the
28 trustee subsequent to the trust's creation.
29 (f) Minimization of potential losses.--If it appears to the
30 court of common pleas that trust property or the interests of a
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1 beneficiary may suffer loss or injury pending a decision on a
2 petition for removal of a trustee and appellate review thereof,
3 the court may, on its own motion or on the petition of a
4 cotrustee or beneficiary, compel the trustee whose removal is
5 sought to surrender trust property to a cotrustee, to a court-
6 appointed receiver or to a court-appointed temporary trustee.
7 The court also may suspend the powers of the trustee to the
8 extent the court deems necessary.
9 (g) Reasonable costs.--
10 (1) The reasonable legal and accounting expenses and the
11 costs of expert witnesses of the petitioners associated with
12 petitions for removal, surcharge or both shall be borne by
13 trust principal, except as provided in paragraph (4).
14 (2) The reasonable legal and accounting expenses and the
15 costs of expert witnesses of an incumbent trustee, including,
16 but not limited to, those associated with an ancillary
17 surcharge action, shall be charged to that trustee.
18 (3) Regardless of the outcome of the proceeding, under
19 no circumstances shall the trustee be entitled to charge a
20 termination or other fee or be reimbursed by the trust for
21 its costs or those of any third party.
22 (4) If the proceeding results in a change of trustee and
23 the trustee has refused to transfer administration of the
24 trust to a successor trustee on request of the sui juris
25 beneficiaries voting under the same arrangement used to
26 qualify a petition to the court, then the reasonable legal
27 expenses and costs of any expert witnesses of the petitioners
28 under paragraph (1) shall instead be borne by the removed
29 trustee.
30 (h) Notification.--Within 90 days of enactment, a trustee
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1 shall notify each sui juris beneficiary of irrevocable trusts it
2 manages of the provisions of this section. At least once every
3 five years, notification of the provisions of this section shall
4 be provided to the sui juris beneficiaries of all irrevocable
5 trusts managed for the duration of all irrevocable trusts then
6 managed.
7 Section 2. This act shall take effect immediately.
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