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Legal Memorandum: Action for Wasting Trust Funds

Issue: Is there any authority that grants a child or other remainderman maintained a cause of action against a trustee for failure to take action to prevent a trust beneficiary from using trust funds to cause physical harm to the remainderman?

Area of Law: Estate Planning & Probate
Keywords: Use of trust funds; Physical harm to the remainderman
Jurisdiction: Federal
Cited Cases: 76 N.W.2d 499; 994 S.W.2d 561; 263 N.W.2d 610; 793 P.2d 315; 668 N.W.2d 208; 536 N.E.2d 419; 280 N.W. 159; 377 N.W.2d 9
Cited Statutes: None
Date: 06/01/2008

A nationwide search revealed only one case that even mentions a possible cause of action against a trustee for waste of trust funds by providing them to an alcoholic beneficiary.  There, however, the court merely mentions that the adult child of the beneficiary had contacted an attorney and the probate judge regarding “perceived waste of trust assets in the form of distributions to her alcoholic mother.”  After that contact, however, no other action was taken on that issue, and a later suit was ultimately dismissed based on the statute of limitations.  Mayer v. M.S. Bailey & Son, 555 S.E.2d 406 (S.C. Ct. App. 2001). 

While Mayer does not discuss whether the contingent beneficiary would have had a cause of action against the trustee for waste of trust assets, such an action may be available under certain facts.  See In Re Trust Under Will of Albert Schultz, 9 N.W.2d 313 (Minn. 1943) (“Although there are authorities holding that a beneficiary cannot maintain a suit against a trustee where his interest is dependent upon a remote contingency — one which is unlikely ever to occur — we believe it to be the better rule that such a beneficiary may upon reasonable cause apply to the court to have his interest properly secured.  This rule has substantial support in the authorities.  Although a contingent remainderman can have no action for damages for waste, he may, under the rule as borne out by the great weight of authority, have equitable relief to prevent […]

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