Summary
The Supreme Court of Iowa considered whether to remove a trustee for failing to provide annual accountings, alleged conflicts of interest, and hostility toward trust beneficiaries. The court affirmed the refusal to remove the trustee, holding that the breaches and family friction did not endanger the trust or substantially impair its administration. It reversed the appointment of a cotrustee because no exceptional circumstances justified altering the settlor's chosen trust structure.
Topics
Practice areas
Questions Presented
- Whether the district court erred in refusing to remove the settlor-appointed trustee based on failure to provide annual accountings, alleged conflict of interest, and hostility between the trustee and beneficiaries.
- Whether the district court had discretion to appoint an additional cotrustee when there was no vacancy and the trust instrument specified a single trustee.
Holdings
- The district court properly refused to remove the trustee because removal is warranted only when it is clearly in the best interests of the trust and its beneficiaries or when the trust's objects are endangered. The trustee's failure to provide accountings was a technical breach, but the record did not show that it impaired the trust or outweighed the benefits of continued administration by the settlor-appointed trustee. The alleged conflict and family hostility likewise did not justify removal because there was no showing of bad faith or serious interference with the trust's effectiveness.
- The appointment of a cotrustee was beyond the district court's discretion because there was no exceptional circumstance showing that the trust's administration was inadequate or reasonably likely to become inadequate. The appointment also risked disagreement and voting impasse, contrary to the settlor's intent to maintain centralized authority.
Key quotations
“The power to remove a trustee should be used only when the objects of the trust are endangered.” (461 N.W.2d at 191)
“It is clear from all of these authorities that a trustee does not merely serve at the pleasure of the trust beneficiaries.” (461 N.W.2d at 191)
“We conclude that the appointment of a cotrustee was beyond the court's discretion.” (461 N.W.2d at 194)
Factual background
The 1982 E.F. Schildberg Irrevocable Trust held voting stock in the family holding company and named Dennis Schildberg, the settlor's son, as trustee with broad authority over distributions and voting control. The beneficiaries did not receive annual accountings before the suit was filed, and relations between Dennis and the beneficiaries became hostile after Dennis assumed control of the family companies and removed John E. Schildberg from management of a newly acquired division. The beneficiaries did not allege that Dennis acted illegally or used the corporations for personal gain, and the businesses continued to perform successfully. The district court declined to remove Dennis but appointed a cotrustee to address the family conflict.
Procedural history
The beneficiaries sought removal of Dennis Schildberg as trustee based on his failure to provide annual accountings, alleged conflicts of interest, and hostility that allegedly impaired trust administration. The district court denied removal but appointed Robert G. Roseland as cotrustee. The Supreme Court of Iowa affirmed the refusal to remove Dennis and reversed the appointment of the cotrustee.