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Trustee Removal Case Remanded for Further Review

trusts-estate planning-trustee services - margolis-bloom-d'agostino

When entrepreneur Leo Kahn (founder of two health foods chains which he sold to Whole Foods and an early investor in Staples) died at age 94 in 2011 he left a trust for the benefit of his wife, Emily. In 2020, Emily filed suit to remove her stepson, Joseph (the executive editor of The New York Times) as her co-trustee pursuant to § 706 (b) (4) of the Massachusetts version of the Uniform Trust Code.

Joseph opposed his removal arguing that it was precluded by the trust instrument that only permits the removal of trustees for cause. The probate court agreed, dismissing Emily’s lawsuit. She appealed to the Appeals Court which in In the Matter of the Leo Kahn Revocable Trust (Mass. App. Ct. No. 21-P-929, December 12, 2022), disagrees with the probate court and Joseph, sending the case back to the probate court for further consideration.

Which Governs, Trust or Trust Law?

The Appeals Court agrees with Joseph and the probate court that where the Massachusetts statute and the trust instrument are in conflict, the trust takes precedence. This is true of the Massachusetts Uniform Trust Code in general with the exception of certain specified provisions. And, specifically, § 706 (b) (4) states that it applies only if it is “not inconsistent with a material purpose of the trust.”

Further, the Court agrees with Joseph that he may only be removed for cause. The trust is somewhat unusual in that it lists 12 specific reasons a trustee may be removed “for cause.” However, it then adds a 13th “cause” for trustee removal that includes “[a]ny other reason for which a state court of competent jurisdiction would remove a trustee.” The question for the Court is whether this may be read to include § 706 (b) (4). It can’t decide, concluding “that the trust is ambiguous as to whether removal under § 706 (b) (4) would constitute a ‘for cause’ or ‘without cause’ reason for removal, and that it was therefore error to dismiss Emily’s petition for failure to state a claim.”

Joseph had argued, and the probate court had agreed, that § 706 (b) (4) constitutes removal without cause and is thus precluded by the trust. “But,” the Appeals Court states, “Joseph points us to no authority that defines removal ‘without cause,’ or that places § 706 (b) (4) within such a category.”

How Can Grantor’s Intent Be Determined?

Since it finds that the trust is ambiguous, the Appeals Court remands the matter back to the probate court to take evidence as to Leo Kahn’s intent in order to resolve the ambiguity.

No doubt, this case will be back in front of the Appeals Court unless the parties can settle the matter. It’s unlikely that testimony about Leo’s intent will be conclusive. Not only did he execute the trust in 2006, 17 year ago, but most likely the trust provisions at issue were part of his attorney’s boilerplate documents, not something that was discussed in detail and drafted specifically for this trust. If that is the case, it may be difficult to resolve the ambiguity through testimony as to the Leo’s intent.

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