Other Assets of Beneficiary Taken Into Account in Evaluating the Trustee’s Exercise of Extended Discretion.

The trust instrument directed the trustee to distribute principal and income in trustee’s sole discretion to provide for the beneficiaries’ “maintenance, support, education, health and welfare” and purported to exempt the trustee’s exercise of discretion from judicial review.  The beneficiaries petitioned for removal and replacement of trustee, their mother and daughter of the settlor, on the grounds that she refused to make distributions to pay for the beneficiaries’ college education and to purchase automobiles.  The trial court granted the petition and the appellate court reversed, holding that while the language purporting to forbid judicial review of the exercise of discretion was nugatory, it did indicate that the settlor intended the trustee to have the greatest latitude permitted by law.  The court then held that the beneficiaries had other resources, including 529 plans, adequate to pay their college expenses.  In re Trusts for McDonald, 953 N.Y.S.2d 751 (N.Y. App. Div. 2012).

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.