Trustees and fiduciaries in New York
Key takeaway
Trustees and fiduciaries in New York are held to duties that courts enforce through accounting rights, conflict rules, removal and limits on exoneration clauses. For owners of businesses, real estate and private investments who name a trustee, an executor or an advisory committee, New York decisions describe where fiduciary responsibility sits.
Accounting rights for a revocable trust
A remainder beneficiary of a revocable trust generally lacks standing to compel an accounting of the trust's administration before the grantor's death. The New York County Supreme Court so held. The holding concerns a remainder beneficiary, meaning a person who takes what is left in the trust.
A release signed by a grantor may waive the grantor's own right to an accounting. The same court found that the release was not a clear and unambiguous waiver by the other trustee and the trust beneficiaries.
Conflicts of interest for executors and co-fiduciaries
A fiduciary who holds a second role connected to estate business can face a direct conflict. A Surrogate's Court found that an executor who also served as a gallery director had such a conflict in negotiating the estate's paintings consignment. The two roles were estate fiduciary and gallery director.
Conflict between co-fiduciaries can also lead to removal.
Advisory committees and shared fiduciary duty
An advisory committee that directs a trustee carries fiduciary weight of its own. A New York court addressed a trust in which the committee held broad authority, and it described three points about how that authority works.
- The advisory committee's broad authority could not be used contrary to the trust's stated purpose.
Limits on exoneration clauses
New York courts have held exoneration clauses void as against public policy in certain settings. One court held a clause void because it attempted to make the trustee completely unaccountable to the advisory committee.
A second court addressed a trust drafted by an attorney who was named as the trustee.
Commissions and surcharges
A surcharge against a fiduciary does not automatically mean the fiduciary loses commissions. A New York court said not every surcharge means denied commissions.
Common questions
Can an exoneration clause free a New York trustee from liability?
New York courts have held exoneration clauses void as against public policy in two settings. One clause tried to make the trustee completely unaccountable to the advisory committee. Another limited liability to bad faith acts in a trust drafted by an attorney named as trustee.
Can a remainder beneficiary demand an accounting from a revocable trust in New York?
The court also found that a grantor's release was not a clear and unambiguous waiver by the other trustee and beneficiaries.