A Trustee Cannot Escape His Duties
By Kluger, Kaplan, Silverman, Katzen & Levine, P.L. January 22, 2014
By Bruce A. Katzen
Recently I have encountered situations where an individual is named co-trustees of a trust , but really just acts as a rubber stamp and has very little interest or desire to fulfill the obligations. Rather than resigning, the co-trustee may allow another trustee to make all of the decisions of the trust. This is not a wise choice.
If the co-trustee who is actually making the decisions for the trust acts dishonestly and removes money from the trust, the co-trustee may be liable for the acts of the other trustee. For example, a co-trustee may pay himself or herself an exorbitant salary or take improper distributions to the detriment of other beneficiaries. In these situations, the passive co-trustee who does not take an active role in the administration of the trust may be liable for breach of the fiduciary duty that is owed to the beneficiaries.
Oftentimes the trustees themselves may also be beneficiaries under the trust, creating a heightened responsibility to act in the best interest of all beneficiaries, not in one’s own self interest. In these scenarios the passive co-trustee may again encounter problems if he or she remains silent to the detriment of other beneficiaries.
While the co-trustee may insist her or she did not ask for the burden of trust administration, if one cannot or does not want to perform the duties required by a trustee, the proper avenue is to either resign from the trustee position or seek removal from the court. Otherwise, there is a duty to administer the trust assets with due care and for the benefit of all trustees. Ignoring one’s duties or deferring to other trustees may result in liability.