Tuesday, February 12, 2013
When trustees of a trust have a dispute, it is the duty of the trustee to follow the terms and the purpose of the trust and do what is in the best interest of all of the beneficiaries. However, often the trustee is compelled by the circumstances of the dispute to take a position, which may place him or her in an adverse position to one or more beneficiaries of the trust. So, the question remains as to how far a trustee can advocate for that particular side?
As I have previously discussed, the Supreme Court of New Hampshire recently ruled against one of the beneficiaries of a trust with an in terrorem clause. In this case, Elizabeth Tamposi challenged the terms of the trust and forfeited her right to draw from the trust. The trustee also challenged the ruling. Before the case could get to court, the beneficiary withdrew her appeal. The trustee, however, chose to move forward with the appeal. At the supreme court, "the other beneficiaries contended that the trustee did not have standing to challenge the ruling that the in terrorem clause was violated." The supreme court agreed with the other beneficiaries. The court noted that a trustee must act impartially "with respect to the various beneficiaries of the trust." The court reasoned that because the adverse ruling only affected one of the beneficiaries and she abandoned the appeal, "there was no reason for the trustee to pursue the appeal on her behalf." Therefore, the trustee lacked standing to bring the appeal.
See Luke Lantta, A Cautionary Tale About Trustees Picking Sides Between Beneficiaries, BryanCaveFiduciaryLitigation.com, Feb. 7, 2013.