There are many different types of trusts. A trust may be created as part of the terms of a Last Will and Testament. Such a trust is known as a testamentary trust. In these cases, the testator incorporates the trust terms into the dispositive provision in a Will. For example, a Will may provide that a dollar amount or percentage amount passing under a Will be given to a trustee to hold and administer according to the trust terms which are specifically set forth in the Will. The language in the Will names the beneficiaries of the trust. Provisions are usually made for alternate beneficiaries and for successor trustees.
A trust can also be created separate and apart from a Will. This document also contains the various provisions designating trustees and beneficiaries.
Regardless of the type of trust, it is important that the trust document set forth with clarity the manner in which the trust property is to be paid or applied for the benefit of the trust beneficiaries. Also, the powers or authority of the trustees should be specified.
It is not uncommon for the language regarding the administration of a trust to be unclear or ambiguous. Also, there may be situations where a trustee and a beneficiary have different views as to how a trust should be administered. For example, if a trust provides that the trust income is to be paid to the beneficiary on a recurring basis, a dispute might arise concerning the manner in which trust assets are invested. Some investments may generate current income while others may generate little income but have long-term principal appreciation expectations. Obviously, the income beneficiary may prefer that the trustee invest in the income-producing asset. Many of these disagreements end up in litigation in the Surrogate’s Court.
Both the Surrogate’s Court and the Supreme Court have jurisdiction to hear trust disputes. A determination as to which forum is best suited for a case depends on various factors. With regard to testamentary trusts, most proceedings are held in the Surrogate’s Court, where the Will in which the trust is set forth was probated.
An interesting case regarding a Manhattan trust was recently the subject of a decision by New York Supreme Court Justice Lyle E. Frank on September 21, 2023 and was entitled Bildner v. Bildner. In this case, a testamentary trust beneficiary commenced a proceeding in Supreme Court to remove the trustee and to compel distribution of funds for education expenses. When the proceeding was initiated, the Court put on hold any determination pending the receipt of deposition testimony by the trustee. This disposition was provided for by CPLR §7701 entitled “Special Proceeding relating to express trust.”
The main issue presented was that the trust terms gave the trustee broad discretion regarding the distribution of trust assets. While the Court acknowledged that the trustee had broad discretion, the Court also found that such discretion was not absolute and that a trustee had a duty to act in good faith and not disregard a beneficiary’s interest. In the deposition, the trustee admitted that there was no good faith effort to ascertain whether the beneficiary actually needed the funds as requested. As a result, the Court found that the trustee was required to distribute the trust funds for the educational expenses. However, the Court did not remove the trustee since the trustee’s conduct did not rise to the level of impropriety to require removal.
I have repeated parties in trust disputes for over forty (40) years. Trust language and administration can be very complicated. Do you have a question regarding a trust or an estate? Call Me Now for a free confidential review of your matter. We offer reasonable and flexible fee arrangements and personal representation.
New York Trusts and Estates Attorney Jules Martin Haas has helped many clients over the past 40 years resolve issues relating to guardianship and probate and estate settlement throughout New York City including the Bronx, Queens, Brooklyn, Manhattan, Nassau and Suffolk County. If you or someone you know has any questions regarding these matters, please contact me at (212) 355-2575 for an initial free consultation.