Trust instruments occasionally permit the trustees – sometimes with or without the beneficiaries’ consent – to terminate the trust early under certain circumstances. Why continue a trust or be forced to go into court when, for example, its purpose has been fulfilled? The Elaine Radlick-Trupp Revocable Trust gave the trustees broad authority to terminate the trust. The trustees could discontinue the trust when they determined discontinuance to be justified, when it was not economically sound to continue, or when they determined that termination was in the best interests of the beneficiaries because of unforeseen circumstances. In the Michigan case of Trupp v. Naughton (unpublished), several of the co-trustees of the trust may have inadvertently triggered the termination provision through their actions.
The trust contained two real properties and we will focus on one – the cottage. Three of Elaine’s children were beneficiaries of the trust. The appellate court does not identify who the trustees were but refers to co-trustees and suggests that the beneficiaries were also the co-trustees. Under the terms of the trust, the beneficiaries were supposed to form a schedule and rules for cottage use. They never did. The court stated that the trustees made no attempt to fulfill the requirements of the trust after Elaine’s death and, therefore, the actions of the parties indicated that the trustees determined that discontinuation of the trust was justified.
The appellate court suggested that, under a Michigan statute, another ground for termination existed – impossibility. Under Michigan law, a trust may be terminated when the purposes of the trust have become impossible to achieve. Because the purpose of the trust was for the siblings to share in use of the cottage, that purpose became impossible when the parties could not follow the terms of the trust. Does this mean that when co-trustees must act unanimously but are deadlocked, a trust can be terminated?