Legal Memorandum: Estate Trustee's Obligation in NY

Issue: Estate Trustee Obligation of Notification Regarding Co-Trustee’s Improper Acts.

Area of Law: Estate Planning & Probate
Keywords: Co-trustee's obligation; Improper acts; Fiduciary duty
Jurisdiction: New York
Cited Cases: 641 N.Y.S.2d 785; 473 N.Y.S.2d 808; 401 N.Y.S.2d 449; 65 N.Y.2d 736; 481 N.E.2d 553; 372 N.E.2d 291; 99 A.D.2d 1018
Cited Statutes: Restatement (Second) of Trusts § 200; Restatement (Second) of Trusts § 194
Date: 11/01/2007

Numerous cases and treatises make it clear that a trustee who knows that a co-trustee has breached a fiduciary duty is under an absolute obligation to object and take steps to rectify the situation.  See, e.g., Quinn v. Post, 262 F. Supp. 598 (S.D.N.Y. 1967) (where fiduciary is chargeable with knowledge that his fellows are acting unlawfully, his failure to disassociate himself from them may be deemed ratification of their conduct and cast him liable); Rosner v. Paley, 116 Misc. 2d 454, 455 N.Y.S.2d 959 (Sup. Ct. 1982), rev’d on other grounds, 99 A.D.2d 1018, 473 N.Y.S.2d 808 (1st Dep’t 1984), rev’d, 65 N.Y.2d 736, 481 N.E.2d 553, 492 N.Y.S.2d 13 (1985) (fiduciary who knew cofiduciary had breached fiduciary duty would himself be guilty of similar breach if he failed to object or take steps to rectify the situation, and this rule would apply even if the breach were committed by predecessor fiduciary).  See also L.S. Tellier, Annotation, Co-trustee’s liabilities for defaults or wrongful acts of fiduciary in handling estates, 65 A.L.R.2d 1019 §§ 21-24 (1959 & Supp. 2007).

The Rothko case is frequently cited for the proposition that a fiduciary, who is aware that his co-fiduciaries are committing breaches of the trust and accedes to such breaches, is legally accountable even if he is acting upon advice of counsel because good faith is not sufficient.  Estate of Rothko, 43 N.Y.2d 305, 320, 372 […]

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