Trustee's Liabilities/ Resignation and Removal of Trustee/ Future Interests

Trustee’s Liabilities

Trustee’s Liabilities - Beneficiaries’ right of enforcement

Beneficiaries’ right of enforcement—lost profits, interests, and other losses resulting from breach of trust are trustee’s responsibility; beneficiaries may sue trustee and seek damages or removal of trustee for breach

Trustee’s Liabilities - Liabilities for others’ acts

Liabilities for others’ acts—cotrustees are jointly liable; trustee is liable for predecessor’s breach if he failed to address it or was negligent in delivering property; generally, trustee is liable for agent’s breach if trustee directs or conceals agent’s act or fails to exercise reasonable supervision over agent

Trustee’s Liability - Third Parties

1. Trustee is personally liable for contracts entered into and tortious acts committed while acting as trustee; can seek indemnity from trust if trustee acted within scope of duties

2. When property is improperly transferred as result of breach of trust to third party who is not bona fide purchaser, beneficiary or successor trustee may have transaction set aside

Resignation of Trustee

—30 days’ notice to qualified beneficiaries, living settlor, and cotrustees, or by court approval

Removal of Trustee

—by court because of trustee being incapable of performing or materially breaching duty, conflict of interest, conflict between trustee and beneficiary, poor trust performance

Future Interests - General rule

—grantor retains reversion, possibility of reverter, or right of entry; beneficiary is given remainder or executory interest

Future Interests- Class gifts

—share of deceased class member is paid to that class member’s surviving issue; by statute, modern trend is that a substitute gift is created in descendants of deceased issue so that predeceased beneficiary’s interest in trust will not lapse