Case Law Update: Trusts
A sister named her brother as the successor trustee of a trust created by their father for her benefit, remainder at her death to her issue but if none, to her brother. After relations between the siblings deteriorated, the sister adopted her adult stepchildren (she had no biological children) and attempted to remove her brother as the trustee. After her death, the adopted stepchildren brought an action seeking a declaration that they were remainder beneficiaries, alleging violation of the prudent investor act, and seeking removal of the trustee. The trial court dismissed and the stepchildren appealed.
In Faville v. Burns, 2011 Ill. App (1st) 110335, the Illinois intermediate appellate court reversed holding: (1) state law excluding persons adopted after the age of 18 from inheritance rights to and from the adopting parent and from rights under instruments unless they resided with the adopting parent as minors by its terms did not apply to instruments executed before January 1, 1998 and therefore did not apply to the trust at issue; (2) the allegation that the trustee violated the prudent investor act by failing to invest the trust property to produce sufficient income did not state a cause of action because the statute creates a test of conduct and not performance, and (3) the trustee’s status as a contingent remainder beneficiary creates a potential conflict of interest with the adopteds requiring judicial consideration of their request that the trustee be removed.
Special thanks to William P. LaPiana (Rita and Joseph Solomon Professor of Wills, Trusts,and Estates, New York Law School) for sending me this case law update.