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Where a motion to remove a trustee was allowed, the probate court did not provide a factual basis to support any of the statutory reasons for trustee removal, so a remand is necessary.
“A probate court may remove a trustee only in accordance with MCL 700.7706(2). Because the probate court did not provide a factual basis to support any of the statutory reasons for trustee removal, we vacate the appointment of a new trustee and remand to the probate court for further proceedings. …
“Kathryn Plank executed the Kathryn Plank Revocable Living Trust (‘the Plank Trust’) on July 31, 2002, and originally named herself as the trustee. Plank has two daughters, Helen Marentette and Virginia Hamilton, as well as several grandchildren. …
“[Appellant Paula] Duncan challenges the probate court’s decision to remove her as Trustee, arguing there are no facts to support any of the conditions for removal in MCL 700.7706(2). …
“Although the probate court did not expressly rely on the statutory grounds for removal listed in MCL 700.7706(2), the court reasoned Duncan did very little between being appointed and the date of the removal hearing, ‘a full accounting and investigation’ was still necessary, ‘and clearly she’s not.’ From what we can gather from the scant record, it seems the statutory reason for the removal was MCL 700.7706(2)(c).
“[Appellees Mary Walters and Ray Marentette] began demanding an accounting of Plank Trust assets as soon as Duncan became Trustee, and the hostility between the parties is apparent from the record. But hostility between a Trustee and beneficiaries, by itself, without evidence that the administration of the Trust has been affected, does not provide a basis for removing a Trustee. … While there is some record evidence of Duncan’s delay in reporting the remaining balance of assets, the record does not yet support Duncan’s ‘unfitness, unwillingness, or persistent failure … to administer the Trust effectively.’ MCL 700.7706(2)(c). Duncan was Trustee of the Plank Trust for only three months before appellees sought her removal, and the probate court and both parties acknowledged the complexity of the Plank Trust assets because of Helen’s embezzlement. While the MTC imports on the Trustee a duty to keep beneficiaries ‘informed about the administration of the trust,’ MCL 700.7814(1), it does not specifically define what is required for an accounting. But the minimum requirement of the MTC is that a Trustee provide beneficiaries an ‘annual report of the trust property, liabilities, receipts, and disbursements.’ MCL 700. 7814(2).
“Even though MCL 700.7814(4) affords the probate court discretion to order the Trustee to provide more than an annual accounting, and Walters and Ray moved for the probate court to order an accounting, the probate court did not order one. The probate court’s order directed Duncan to ‘notify the parties as soon as practicable of the remaining assets owned by the Trust,’ which is distinct from an accounting because it does not include an order for a report of Trust liabilities, receipts, and disbursements. And Duncan substantially complied with the probate court’s order when, on October 11, 2024, she emailed counsel for Walters and Ray a summary of the balance of Plank Trust Account funds from September 2020 to September 29, 2024, which documented that $2,059.94 in assets remained.
“This amount is not entirely unreasonable given that Virginia informed the probate court that during her Trusteeship, she sold the real property within the Plank Trust, as well as the items inside it, and relocated Plank to assisted living in Arkansas before her death. The Plank Trust assets were further affected by Helen’s embezzlement. Although the MTC directs a Trustee to take ‘reasonable steps to locate trust property and compel a former trustee or other person to deliver trust property to the trustee,’ MCL 700.7813(1), by the time Duncan became Trustee, the record evidence supports that there was very little left in the Plank Trust. Walters and Ray further contend that there was $1.2 million in Plank Trust assets that Duncan failed to account for, and seemed to imply Virginia embezzled Plank Trust assets during her time as Trustee. But the record does not support this, and the probate court clearly erred to the extent that it relied on the allegedly missing $1.2 million as grounds for Duncan’s removal as Trustee.
“With very little assets left in the Plank Trust, and no evidence that Duncan failed to sell, invest, or receive any Plank Trust assets or property, it is not clear what more Duncan could do to comply with her duties as Trustee. Duncan’s failure to do more than what she was ordered to do does not constitute ‘unfitness, unwillingness, or persistent failure … to administer the Trust effectively.’ MCL 700.7706(2)(c). To the extent there is more to this that is not reflected on the record, the probate court is permitted to further develop the record on remand. However, at this juncture, and with this record, we hold the trial court has abused its discretion by removing Duncan as Trustee under MCL 700.7706(2).
“Vacated and remanded for further proceedings consistent with this opinion.”
