CHAPTER 71
TRUST ESTATES
Subchapter
A. Appointment of TrusteesD. Powers, Duties and Liabilities
E. Sales, Pledges, Mortgages, Leases, Options and ExchangesF. Accounts, Audits, Reviews and Distributions
G. Separation and Combination of Trusts
APPOINTMENT OF TRUSTEES
Sec.
7102. Service of process on nonresident trustee (Repealed).
7104 Power of trustee to resign.
7105. Filing resignations and appointments.
The court, after such notice to parties in interest as it shall direct, may appoint a trustee to fill a vacancy in the office of trustee, subject to the provisions, if any, of the trust instrument.
§ 7102. Service of process on nonresident trustee (Repealed).
When no trustee shall be a resident of the Commonwealth, the court, after such notice as it shall direct, may appoint one or more additional trustees resident within the Commonwealth to serve with the nonresident trustee or trustees.
§ 7104. Power of trustee to resign.
(a) Court approval.--Any trustee may resign with court approval.
(b) Without court approval if authorized by governing instrument.--Any trustee may resign without court approval if authorized to resign by the governing instrument.
(c) When individual trustee may resign without court approval and without authorization in governing instrument.--Unless expressly provided to the contrary in the governing instrument, an individual trustee may resign without court approval and without authorization in the governing instrument if:
(1) consented to in writing by all co-trustees, if there are one or more co-trustees; and
(2) consented to in writing by all of the sui juris beneficiaries currently eligible to receive income and by all the sui juris beneficiaries who would receive, if no powers of appointment were exercised, a distribution of principal if the trust were to terminate immediately prior to the resignation, provided that no such resignation shall be effective unless there is at least one such income beneficiary and at least one such remainderman.
This subsection shall not authorize the sole trustee of a trust to resign unless the governing instrument names a successor trustee or provides a method for appointing a successor trustee, and in either case the resignation shall not be effective until the successor trustee accepts in writing his appointment.
(d) Liability.--The resignation of a trustee shall not be itself relieve the resigning trustee of liability in connection with the administration of the trust.
(e) Definition.--As used in this section, the term "sui juris beneficiary" includes a guardian for an incapacitated beneficiary, an agent acting under a durable power of attorney for an incompetent beneficiary and a court-appointed guardian of a minor's estate or, if none, the minor's parents.
§ 7105. Filing resignations and appointments.
A resignation of a trustee, an appointment of a trustee and an acceptance of an appointment of a trustee may be filed with the clerk of the orphans' court division having jurisdiction over the trust.
BOND OF TRUSTEES
Sec.
7111. Necessity, form and amount.
7112. Requiring or changing amount of bond.
§ 7111. Necessity, form and amount.
(a) When required. - Except as hereinafter provided, the court, in its discretion, may require any trustee, whether or not a resident of the Commonwealth, to execute and file a bond which shall be in the name of the Commonwealth, with sufficient surety, in such amount as the court considers necessary having regard to the value of the personal estate in the control of the trustee.
(b) When not required. -
(1) When named in or provided for in trust instrument. - No bond shall be required of a trustee, whether or not a resident of the Commonwealth, who is named in or whose appointment is to be made in a manner specified by the trust instrument, unless such instrument requires a bond or the court, for cause shown, deems it advisable.
(2) Corporate trustee. - No bond shall be required of a bank and trust company or trust company incorporated in the Commonwealth, or of a national bank having its principal office in the Commonwealth, unless the court, for cause shown, deems it advisable.
(c) Condition. -
(1) When one trustee. - The condition of this obligation is, that if the said trustee shall well and truly administer the trust according to law, this obligation shall be void; but otherwise, it shall remain in force.
(2) When two or more trustees. - The condition of this obligation is, that if the said trustees or any of them shall well and truly administer the trust according to law, this obligation shall be void as to the trustee or trustees who shall so administer the trust; but otherwise, it shall remain in force.
§ 7112. Requiring or changing amount of bond.
The court, for cause shown, and after such notice, if any, as it shall direct, may require a surety bond, or increase or decrease the amount of the existing bond, or require more or less security therefor.
REMOVAL AND DISCHARGE
Sec.
§ 7121. Grounds and procedure.
The grounds and the procedure for the removal or discharge of a trustee and his surety and the effect of such removal or discharge shall be the same as are set forth in the following provisions of this title relating to the removal and discharge of a personal representative and his surety:
Section 3182 (relating to grounds for removal).
Section 3183 (relating to procedure for and effect of removal).
Section 3184 (relating to discharge of personal representative and surety).
POWERS, DUTIES AND LIABILITIES
Sec.
7131. Possession of real and personal property.
7132. Abandonment of property.
7133. Powers, duties and liabilities identical with personal representatives.
7135. Substituted or succeeding trustee.
7136. Effect of removal, or of probate of later will or codicil.
§ 7131. Possession of real and personal property.
Except as otherwise provided in the trust instrument, the trustee, until it is distributed or sold, shall have the right to and shall take possession of, maintain and administer each real and personal asset of the trust, collect the rents and income from it, and make all reasonable expenditures necessary to preserve it. He shall also have the right to maintain any action with respect to real or personal property of the trust.
§ 7132. Abandonment of property.
When any property is so burdensome or is so encumbered or is in such condition that it is of no value to the trust, the trustee may abandon it. When such property cannot be abandoned without transfer of title to another or without a formal renunciation, the court may authorize the trustee to transfer or renounce it without consideration if it shall find that this will be for the best interests of the trust.
§ 7133. Powers, duties and liabilities identical with personal representatives.
The provisions concerning the powers, duties and liabilities of a trustee shall be the same as those set forth in the following provisions of this title for the administration of a decedent's or a minor's estate:
Section 3313 (relating to liability insurance).
Section 3314 (relating to continuation of business).
Section 3315 (relating to incorporation of estate's business).
Section 3317 (relating to claims against co-fiduciary).
Section 3318 (relating to revival of judgments against personal representative).
Section 3320 (relating to voting stock by proxy).
Section 3322 (relating to acceptance of deed in lieu of foreclosure).
Section 3323 (relating to compromise of controversies).
Section 3324 (relating to death or incapacity of fiduciary).
Section 3327 (relating to surviving or remaining personal representatives).
Section 3328 (relating to disagreement of personal representatives).
Section 3331 (relating to liability of personal representative on contracts).
Section 3332 (relating to inherent powers and duties).
Section 3353 (relating to order of court).
Section 3354 (relating to power given in governing instrument).
Section 3355 (relating to restraint of sale).
Section 3356 (relating to purchase by personal representative).
Section 3358 (relating to collateral attack).
Section 3359 (relating to record of proceedings; county where real estate lies).
Section 5147 (relating to proceedings against guardian).
Subject only to the provisions of a governing instrument, if any, a trustee may accept, hold, invest in and retain investments as provided by Chapter 72 (relating to prudent investor rule).
§ 7135. Substituted or succeeding trustee.
A substituted or succeeding trustee, except as otherwise provided by the trust instrument, shall have all the powers, duties and liabilities of the original trustee. He shall have the power to recover the assets of the trust from his predecessor in administration or from the fiduciary of such predecessor and, except as otherwise provided by the governing instrument, shall stand in the predecessor's stead for all purposes, except that he shall not be personally liable for the acts of his predecessor.
§ 7136. Effect of removal, or of probate of later will or codicil.
No act of administration performed by a testamentary trustee in good faith shall be impeached by the subsequent revocation of the probate of the will from which he derives his authority, or by the subsequent probate of a later will or of a codicil, or by the subsequent dismissal of the trustee: Provided, That regardless of the good or bad faith of the testamentary trustee, no person who deals in good faith with a testamentary trustee shall be prejudiced by the subsequent occurrence of any of these contingencies.
SALES, PLEDGES, MORTGAGES, LEASES, OPTIONS AND EXCHANGES
Sec.
7144. Reports for school district trustees.
Except as otherwise provided by the trust instrument, the trustee, for any purpose of administration or distribution, may sell, at public or private sale, any real or personal property of the trust. When the trustee has been required to give bond, no proceeds of real estate shall be paid to him until the court has made an order excusing him from entering additional security or requiring additional security, and in the latter event, only after he has entered the additional security.
Except as otherwise provided by the trust instrument, the trustee may lease any real or personal property of the trust for a term not exceeding five years after its execution, unless a longer term is approved by the court.
If the trustee has given such bond, if any, as shall be required in accordance with this title, any sale, pledge, mortgage, or exchange by a trustee, whether pursuant to a decree or to the exercise of a power conferred by the trust instrument or of a power under this title, shall pass the full title of the trust therein, unless otherwise specified. Persons dealing with the trustee shall have no obligation to see to the proper application of the cash or other assets given in exchange for the property of the trust. Any sale or exchange by a trustee pursuant to a decree under section 3353 (relating to order of court) shall have the effect of a judicial sale as to the discharge of liens, but the court may decree a sale or exchange freed and discharged from the lien of any mortgage otherwise preserved from discharge by existing law, if the holder of such mortgage shall consent by writing filed in the proceeding. No such sale, mortgage, exchange, or conveyance shall be prejudiced by the subsequent dismissal of the trustee nor shall any such sale, mortgage, exchange, or conveyance by a testamentary trustee be prejudiced by the terms of any will or codicil thereafter probated, if the person dealing with the trustee did so in good faith.
§ 7144. Reports for school district trustees.
(a) Scope. - This section applies if a school district is a trustee of land in accordance with all of the following:
(1) The land is held for the benefit of the public.
(2) The land is not used directly for school purposes.
(b) Requirement. -
(1) By January 30, the school district shall prepare a report for the prior year concerning the trust.
(2) The report shall detail all of the following:
(i) Revenues generated.
(ii) Expenses incurred.
(iii) Balance of funds held by the school district as trustee.
(iv) A statement regarding the activities taken by the trustee during the prior year to advance the purposes of the trust.
(3) The report must be certified as correct by the district superintendent.
(4) The report shall be made public as follows:
(i) The report shall be published in 14-point type in a newspaper of general circulation in each county in which the land is located.
(ii) The report shall be available during business hours for inspection and copying at the office of the district superintendent. A reasonable fee may be charged for copying.
Notwithstanding 42 Pa.C.S. § 931 (relating to original jurisdiction and venue), jurisdiction over an action involving land referred to in section 7144 (relating to reports for school district trustees) shall be vested in the court of common pleas in the judicial district where:
(1) all of the land is located; or
(2) more than 50% of the land is located.
ACCOUNTS, AUDITS, REVIEWS AND DISTRIBUTIONS
Sec.
7183. Notice, audits, reviews, and distribution.7186. Failure to present claim at audit.
7187. Interest or income on distributive shares.
7188. Annexation of account of distributed estate or trust.
A trustee shall file an account of his administration whenever directed to do so by the court and may file an account at any other time.
All accounts of trustees shall be filed in the office of the clerk.
§ 7183. Notice, audits, reviews, and distribution.
The provisions concerning accounts, audits, reviews, distributions and rights of distributees in trust estates shall be the same as those set forth in the following provisions of this title for the administration of a decedent's estate:
Section 3503 (relating to notice to parties in interest).
Section 3504 (relating to representation of parties in interest).
Section 3511 (relating to audits in counties having separate orphans' court division).
Section 3512 (relating to audits in counties having no separate orphans' court division).
Section 3513 (relating to statement of proposed distribution).
Section 3514 (relating to confirmation of account and approval of proposed distribution).
Section 3521 (relating to rehearing; relief granted).
Section 3532(c) (relating to at risk of personal representative).
Section 3533 (relating to award upon final confirmation of account).
Section 3534 (relating to distribution in kind).
Section 3536 (relating to recording and registering decrees awarding real estate).
Section 3538 (relating to distributions involving persons born out of wedlock).
Section 3539 (relating to change in law after pattern of distribution established).
Section 3540 (relating to absentee and additional distributees).
Section 3541 (relating to order of abatement).
Section 3544 (relating to liability of personal representative for interest).
Section 3545 (relating to transcripts of balances due by personal representative).
§ 7184. Disposition of income.
Except as otherwise provided by the trust instrument, the trustee with the approval of the court, may pay income distributable to a minor or incompetent beneficiary for whose estate no guardian has been appointed directly to the minor or incompetent, or expend and apply it for his maintenance or education.
(a) When allowed. - The court shall allow such compensation to the trustee as shall in the circumstances be reasonable and just, and may take into account the market value of the trust at the time of the allowance, and calculate such compensation on a graduated percentage.
(b) Allowed out of principal or income. - The fact that a fiduciary's service has not ended or the fact that the trust has not ended or the fact that the trust is perpetual shall not be a bar to the fiduciary's receiving compensation for his services out of the principal of the trust. Whenever it shall appear either during the continuance of a trust or at its end, that a fiduciary has rendered services for which he has not been fully compensated, the court having jurisdiction over his accounts, shall allow him such original or additional compensation out of the trust income or the trust principal or both, as may be necessary to compensate him for the services theretofore rendered by him. The provisions of this section shall apply to ordinary and extraordinary services alike.
(c) Compensation prescribed by will or other instrument. - Where the compensation of a fiduciary is expressly prescribed either by provisions of a will or deed of trust or other instrument under which he is acting or by provisions of an agreement between him and the creator of a trust, nothing in this section shall change in any way the rights of any party in interest or of the fiduciary.
(d) Cemetery lots. - The provisions of this section shall not apply to trusts created by cemetery lot owners as endowments for the endowed care and maintenance of burial or cemetery lots, where the corpus or principal sum involved is or does not exceed $5,000, in order that the corpus or principal sum for such endowments should remain undiminished.
§ 7186. Failure to present claim at audit.
(a) General rule. - Any person who at the audit of a trustee's account has a claim which arose out of the administration of trust property, or arises out of the distribution of such property upon any interim or final accounting of the trust, and which is not reported to the court as an admitted claim, and who shall fail to present his claim at the call for audit or confirmation, shall be forever barred, against:
(1) any trust property distributed pursuant to such audit or confirmation;
(2) any distributee of trust property distributed pursuant to such audit or confirmation; and
(3) except as otherwise provided in section 3521 (relating to rehearing; relief granted), any trust property awarded back upon further trust pursuant to such audit or confirmation.
(b) Liens and charges unimpaired. - Nothing in this section shall be construed as impairing any lien or charge on real or personal estate of the trust existing at the time of the audit.
§ 7187. Interest or income on distributive shares.
Except as otherwise provided by the trust instrument or by the provisions of section 3543 (relating to interest or income on distributive shares):
(1) Pecuniary gift. - When a sum of money is directed to be set aside at a specified time as a separate trust, it shall bear interest at the rate of 5% per annum from the date it was to be set aside until it is set aside. When a sum of money is directed to be paid outright, it shall bear interest at the rate of 5 % per annum from three months after it became payable until it is paid.
(2) Specific gift. - A donee of a gift of specific real or personal property directed to be distributed from a trust shall be entitled to the net income from property given to him accrued from the date it became distributable to him.
(3) Residuary gift. - All income from real and personal property earned during the administration of a trust and not payable to others shall be distributed pro rata among the income beneficiaries of any continuing trust of a residuary share and other persons entitled to residuary shares of the trust.
§ 7188. Annexation of account of distributed estate or trust.
A trustee who has received property from a personal representative or from another trustee in distribution of an estate or another trust, may annex a copy of an account of the administration of such estate or other trust to an account filed by the trustee covering the administration of the trust under his management. If notice of the annexation of the account of the estate or other trust is given to the persons required to be notified of the filing of the trustee's account of the principal trust, confirmation of the principal account shall relieve both the trustee of the principal trust and the personal representative or trustee of the distributed estate or other trust of all liability to beneficiaries of the principal trust for transactions shown in the account so annexed to the same extent as if the annexed account had been separately filed and confirmed. When the fund covered by the annexed account has itself received property from another source under circumstances that would have permitted annexation of an account under this section or under section 3501.2 (relating to annexation of account of terminated trust, guardianship or agency), accounts for both funds may be annexed.
SEPARATION AND COMBINATION OF TRUSTS
Sec.
(a) Without court approval. - A trustee may, without court approval, divide a trust into separate trusts, allocating to each separate trust either a fractional share of each asset and each liability held by the original trust or assets having an appropriate aggregate fair market value and fairly representing the appreciation or depreciation in the assets of the original trust as a whole. If the division reflects disclaimers or different tax elections, the division shall relate back to the date to which the disclaimer or tax election relates.
(b) With court approval. - The court, for cause shown, may authorize the division of a trust into two or more separate trusts upon such terms and conditions and with such notice as the court shall direct.
(c) Separate fund. - A trustee may, without court approval, set aside property in a separate fund prior to actual distribution, after which income earned on the separate fund and appreciation or depreciation of the property set-aside shall belong to the separate fund.
§ 7192. Combination of trusts.
The court, for cause shown, may authorize the combination of separate trusts with substantially similar provisions upon such terms and conditions and with such notice as the court shall direct notwithstanding that the trusts may have been created by separate instruments and by different persons. If necessary to protect possibly different future interests, the assets shall be valued at the time of any such combination and a record made of the proportionate interest of each separate trust in the combined fund.