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Issue: Whether a co-trustee can be surcharged for depreciation efforts which have been deleterious to a trust.
| Area of Law: | Estate Planning & Probate |
| Keywords: | Surcharge; Breach of duty; Depreciation efforts |
| Jurisdiction: | Federal, New York |
| Cited Cases: | 477 N.Y.S.2d 604; 291 N.Y. 125; 568 N.Y.S.2d 660; 93 A.D.2d 583; 681 N.E.2d 332; 115 N.Y.S.2d 278; 51 N.E.2d 674; 636 N.Y.S.2d 741; 589 N.Y.S.2d 582; 187 A.D.2d 477; 52 N.E.2d 909; 885 N.Y.S.2d 401; 792 N.Y.S.2d 24; 913 N.Y.S.2d 627; 659 N.Y.S.2d 165; 486 N.Y.S.2d 956; 392 N.Y.S.2d 870; 466 N.E.2d 144; 107 A.D.2d 417; 87 A.D.2d 309; 43 N.Y.2d 305; 177 A.D.2d 225; 435 N.Y.S.2d 632; 845 N.Y.S.2d 833; 183 A.D.2d 684; 401 N.Y.S.2d 449; 280 A.D. 482; 806 N.Y.S.2d 808; 291 N.Y. 376; 141 N.Y.S.2d 439; 451 N.Y.S.2d 110; 165 A.D.2d 499; 379 N.Y.S.2d 923; 372 N.E.2d 291; 90 N.Y.2d 41 |
| Cited Statutes: | None |
| Date: | 04/01/2012 |
As a general matter, beneficiaries may sue a trustee seeking a surcharge for misconduct. Velez v. Feinstein, 87 A.D.2d 309, 451 N.Y.S.2d 110 (1st Dep’t 1982). Decades ago, the New York Court of Appeals stated the settled rule: “[B]eneficiaries of trusts may … insist that the trustee be charged when loss of principal or income eventually ensues by reason of the breaches.” In re Ryan’s Will, 291 N.Y. 376, 385, 404, 52 N.E.2d 909, 912, 922 (1943) (holding that trustee was to be surcharged based on breach of “fundamental rule of undivided loyalty to a trust” and “the rule that a trustee shall not place itself in a position where its interest may be in conflict with its duty”).
Under New York law, “[t]he primary objective of a trustee should be preservation of the trust rather than enrichment of the beneficiary. The duty of a trustee is to keep the funds entrusted to him in a state of security productive of income and subject to future recall.” In re Will of Newhoff, 107 Misc. 2d 589, 594, 435 N.Y.S.2d 632, 636 (Surr. Ct. Nassau County 1980) (citation omitted), aff’d, 107 A.D.2d 417, 486 N.Y.S.2d 956 (2d Dep’t 1985). The duty of a trustee, prior to 1995, was to exercise that degree of care that prudent persons of discretion and intelligence employ in their own affairs. In re Hyde, 44 A.D.3d 1195, 845 N.Y.S.2d 833 […]