Increasingly, trust instruments grant trustees “discretion” to do certain acts. Drafters include this language to account for unanticipated circumstances and make a trustee’s life easier. But even where a trustee has discretion, they can act improperly. “A grant of absolute discretion to a trustee is not a roving commission – the trustee must be guided…
Legal Articles
Trustee Record Keeping Duty
A trustee is required to “keep adequate records of the administration of the trust.” Section 456.8-810, RSMo. This is closely related to the duties to act with prudence and report and inform to the beneficiaries. Failure to follow any of these duties is a breach of trust. It could lead to a damages claim. If…
Reliance on Trust Instrument
A trustee who reasonably relies on the language of a trust is not liable for breach of trust if the breach resulted from the reliance. Section 456.10-1006, RSMo. A court may, for example, modify, reform, or construe the trust in a way that it deviates from the plain language of the trust. If this is…
Breach of Trust, Sole Discretion
Fiduciary and trust litigation can be very complex. In certain trust instruments, a trustee is granted “sole discretion” to do certain things. This language, however, can be very misleading. Even when a trustee is granted “sole discretion,” a trustee may be liable if the trustee willfully abuses his discretion, acts arbitrarily, fraudulently, dishonestly, or with…
Fiduciary Litigation, Breach of Fiduciary Duty
The existence of a fiduciary duty is a question of law for the court to decide, while whether a breach of fiduciary duty occurs is a fact question. Scanwell Freight Express STL, Inc. v. Chan, 162 S.W.3d 477, 481 (Mo. 2005). So, in any fiduciary litigation, there are two main steps: (1) establishing that a…
Creditor Claims Against Trust-Maker
During the lifetime of a settlor (i.e., trust-maker), the property of a revocable trust is subject to claims of the settlor’s creditors. Section 456.5-505.1, RSMo. Upon the settlor’s death, most revocable trusts are structured to where the trustee may pay the settlor’s last debts and expenses. Because these expenses can arise down the road and…
Common Law Fiduciary Duties
Trustees, personal representatives, attorneys-in-fact, corporate directors, limited liability company managers, etc. owe fiduciary duties. Generally speaking, a fiduciary duty is where one person has a legal obligation to act in another’s interests. Whether a fiduciary duty exists is a question of law, while breach of fiduciary duty is usually a question of fact. Scanwell Freight…
Trustee Discretion in Breach of Trust Claims
“A violation by a trustee of a duty the trustee owes to beneficiary is a breach of trust.” Section 456.10-1001, RSMo. Despite this broad statutory principle, and depending on the context, a trustee can have a number of defenses to a breach of trust claim. For example, where a trust instrument grants a trustee discretionary…
Trustee Bond
A trustee’s bond is essentially an insurance policy which designates a sum of money that may be recovered to the extent a trustee mismanages a trust estate. For example, if a trustee has a bond, and misappropriates assets, a beneficiary may be able to initiate a claim for breach of trust and recover against the…
Power of Attorney Litigation, Attorney Fees
Power of attorney litigation often occurs in conjunction with trust litigation. While there are similarities between the fiduciary duties of a trustee and attorney-in-fact, there are different statutory regimes and differing duties. As a general matter, a trustee’s fiduciary duties are more stringent and comprehensive than the duties of an attorney-in-fact. Significantly, the power of…