Iowa Law Blog : Iowa Lawyer & Attorney : Sullivan & Ward Law Firm : Iowa Law Blog

A recent ruling from the Iowa Court of Appeals reinforced the difficult challenge to have a trustee of a trust removed.  With a contentious history between the beneficiaries and the trustee which included a fight over trustee and attorney fees, the Iowa Court of Appeals refused to remove the trustee as requested.  The Court initially indicated that the trustee fees were reasonable, even though the trustee did not provide an itemization of services provided.  With the court not finding excessive fees as approved by the district court, the conduct of the trustee did not rise to a level necessary to remove the trustee.

The moral of the story?  When you select a trustee as part of your estate plan, place some serious thought on who will fill that role as it can be difficult, if not impossible, to remove the trustee without cause.  It is also prudent to be sure to understand the bank's trustee fee schedule and to discuss the plan with the beneficiaries.

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Prior posts on this site have dealt with terminating a trust or breaking a trust in Iowa.  A recent case from the Iowa Court of Appeals further clarified the ability of beneficiaries to terminate a trust in Iowa under the Iowa Trust Code.  In the Matter of the Trust under the Last Will and Testament of Mary E. Weitzel, Mom executed a will which provided that her assets would stay in trust for her life, then upon daughter's death, the balance of the estate would pass to daughter's children (mom's grand kids).  The will contained a relatively common provision, called a "spendthrift" provision, which prevented the daughter or the creditors of the daughter from getting access to the trust principal.  The daughter claimed that the creditor issues that once existed were no longer an issue, and thus the spendthrift provision was no longer needed.  Apparently, daughter and sons didn't care for the bank as the trustee and having restrictions in their access to the trust assets, so they sought to have the trust terminated. 

The Iowa Trust Code permits termination of a trust if all of the beneficiaries consent and there remains no further material purpose of the trust.  The question in this case focused on whether the spendthrift provision constituted a material purpose, thereby not permitting the trust to be terminated even if all of the beneficiaries consent to the early termination.  The ruling from the Iowa Court of Appeals was that the spendthrift provision, with the facts of this case, was a material purpose and would not permit the trust to be terminated before the trust was directed to be terminated.

This ruling further emphasizes the direction that Iowa courts are going in preserving trusts.  Some other states are taking a different approach in adopting a flexible approach permitting the termination of trusts when all of the beneficiaries consent.

Rather than terminating a trust, what if the beneficiaries sought to simply amend the provisions of the trust?

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A recent story in the Des Moines Register Dead Iowan fathers child; is daughter entitled to survivor benefits?  illustrates the need for the laws, in Iowa and elsewhere, to catch up to today's technologies or at begin discussion of bioethics for certain medical situations that have significant legal impacts.

Patti Beeler is fighting for social security benefits for her daughter, who was conceived after the death of the girl's father from frozen sperm after the father died from cancer. This story is another example of why laws need to be updated to address these types of situations. This case is just one of several that will likely continue to emerge in the near future as courts from around the country have taken opposite positions as to whether a posthumously conceived child is entitled to inherit.  Iowa laws currently do not permit such a child to inherit as an heir as the child was conceived after the biological parent's death.  See Iowa Code 633.220.  The social security administration looks to local law to determine who would qualify as a dependent for purposes of social security benefits.  Thus, Iowa law is not favorable for this little girl, who will never know her father.

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