Legal Memorandum: Trustee's Duty to Account for Corporate Activities

Issue: Under New York law, must a trustee must account for corporate activities if the trust owns the corporation?

Area of Law: Corporate & Securities, Estate Planning & Probate
Keywords: Trustee's duty to account; Corporate activities; Corporation doctrine
Jurisdiction: New York
Cited Cases: 97 N.E.2d 888; 227 N.Y.S.2d 991; 222 N.Y.S. 532; 233 N.Y.S.2d 968; 172 N.Y.S.2d 57; 141 N.Y.S.2d 439
Cited Statutes: None
Date: 09/01/2009

Nearly 60 years ago, the Court of Appeals recognized that:

It is well-established that where a trustee holds a working control of the stock in an estate corporation he is accountable in probate court for the administration of the corporate affairs.  His cestuis que trustent may require him to treat the corporate transactions as though they were his transactions as trustee.

In re Hubbell’s Will, 302 N.Y. 246, 97 N.E.2d 888, 891 (1951).

Many other New York cases are to similar effect, some specifically noting that where the trust or trustee owns or controls a corporation, the trustee’s duty to account should include the corporation’s activities.  See, e.g., In re Sylvester’s Estate, 5 A.D.2d 970, 172 N.Y.S.2d 57, 58 (1st Dept. 1958) (“There can be no question that where an estate fiduciary is a controlling stockholder in a corporation by reason of holding such stock in a fiduciary capacity, he can be compelled to disclose the details of the corporate activities.”); In re Topping’s Estate, 36 Misc. 2d 991, 233 N.Y.S.2d 968, 971 (Sur. Ct. 1962) (where fiduciary owned all the stock in corporation on behalf of estate, “the fiduciary is under a duty to account not only for estate transactions but for the operations of the corporation, and the acts of the fiduciary in connection therewith, particularly if such acts may affect the value of this estate asset”); In re Voice’s Will, 35 Misc. 2d 225,