Tuesday, April 23, 2013
Recently, courts addressed whether a trustee of a revocable trust can be liable and must account to the remainder beneficiaries after the settlor's death. After three cases, the court developed and shaped this rule: the trustee has a fiduciary duty to the settlor only when the trust is revocable. However, even after the settlor's death, the trustee still does not have a duty to the remainder beneficiaries in a revocable trust. Below is a short summary of the first case's holdings.
In Pennell v. Alverson, the court held that the Angella Alverson, one of the settlor's daughters, and ultimately a sole trustee, did not owe a fiduciary duty during the settlor's lifetime to the remainder beneficiaries. The court found that the trust terms did not require a fiduciary duty on the trustee to the remainder beneficiaries during the settlor's life. Additionally, the trustee only owed a duty to the settlor during that time. However, the remainder beneficiaries had standing to bring claims of breaches of duty during the settlor's lifetime.
See Kathy Sherby and Stephanie Moll, Is the Trustee of a Revocable Trust Answerable to the Remainder Beneficiaries? Ever?, Trustbryancave.com, Apr. 19, 2013.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.