## Facts

- A testator’s will created a testamentary trust for his five children as income beneficiaries, with remainder to lineal descendants per stirpes; the trust would end after the death of the last qualifying child or grandchild alive at the testator’s death.
- The will required trust income to be paid equally to the children at least annually (or more frequently by trustee agreement).
- The will also granted trustees broad discretion to allocate receipts and expenses between income and principal as they deemed equitable and fair.
- Co-trustees included three of the testator’s sons and a corporate trustee, Citizens & Southern National Bank (CSNB).
- CSNB invested trust assets in a corporation in which CSNB had an ownership interest.
- For several years, CSNB made no current income distributions and allocated approximately \$550,000 to principal.
- CSNB did not collect trustee compensation during that same period, then later sought payment of accumulated fees.
- Two sons (also co-trustees) and a daughter sued to compel distribution of accumulated income and to remove CSNB for mismanagement and conflict of interest; CSNB counterclaimed for fees.
- The trial court ordered an immediate \$250,000 allocation to income for distribution, restricted future allocations to income until two years after the last surviving child’s death, refused to remove CSNB, and awarded CSNB reasonable fees payable from principal.

## Issues

1. Whether broad trustee discretion to allocate between income and principal permitted multi-year nonpayment of any income despite a directive to distribute income at least annually.
2. Whether the trustee’s allocation practices and investment decisions violated fiduciary duties, including impartiality between income beneficiaries and remaindermen, and warranted judicial correction.
3. Whether CSNB’s conduct required removal as co-trustee for mismanagement or conflict of interest.
4. Whether CSNB could recover previously uncollected trustee compensation and whether such fees could be charged to principal rather than income.

## Decision

- The Supreme Court of Georgia largely affirmed the trial court’s judgment.
- It held that the trustees had unusually broad allocation discretion, but that discretion remained subject to fiduciary limits and judicial review for abuse.
- It approved compelling an immediate \$250,000 allocation to income to effectuate the will’s requirement of at least annual income distributions.
- It approved the trial court’s prospective restriction on further income allocations as a permissible equitable balancing of income and remainder interests.
- It affirmed the refusal to remove CSNB, finding the record insufficient to require the extraordinary remedy of removal.
- It affirmed the award of reasonable trustee fees and upheld charging those fees to principal.

## Legal Principles

- A trust instrument may grant broad discretion to allocate receipts and expenses between income and principal, but that discretion cannot defeat an express directive that income be paid at least annually.
- Trustee discretion, even when framed broadly, is constrained by fiduciary duties; courts review for bad faith, arbitrariness, capriciousness, or clear abuse of discretion rather than substituting their own judgment.
- Trustees owe duties of loyalty and impartiality, requiring reasonable administration that does not unreasonably favor income beneficiaries over remaindermen or vice versa.
- Removal of a trustee is an extraordinary remedy and generally requires serious misconduct, persistent failure, or conduct plainly inconsistent with the trust’s purposes.
- Absent a contrary trust provision, a trustee is entitled to reasonable compensation, and a court may permit accrued fees to be paid from principal where equitable and consistent with protecting income distributions.

## Conclusion

The court enforced the will’s annual-income mandate while recognizing broad allocation discretion, upheld the trial court’s equitable reallocation and future limitations to protect both income and remainder interests, declined to remove the corporate trustee on the record presented, and affirmed an award of accrued trustee compensation payable from principal.


Citizens & Southern Nat’l Bank v. Haskins, 254 Ga. 131, 327 S.E.2d 192 (1985)