Presentation on theme: " Must be “interested person” Beneficiary Trustee Attorney general (charitable trusts) Others affected by the trust?"— Presentation transcript:
Must be “interested person” Beneficiary Trustee Attorney general (charitable trusts) Others affected by the trust?
Must determine under state law the parties who MUST be involved with the lawsuit. Note that you may wish to involve other parties to get them bound to the judgment.
Must bring lawsuit in a court which has jurisdiction over the trust. Inter vivos vs. testamentary? Amount involved? Court system in state Court system in county
Must bring lawsuit in county with proper venue. County of trustee’s residence? County of situs of trust administration? County of beneficiary’s residence? County where breach occurred? Different for individual and corporate trustees? Different for multiple trustees?
Can an order binding a party bind non- parties? Bind guardian, bind ward (minor or incompetent)? Bind parent, bind minor child? Bind person with substantially similar interest to a party if no conflict of interest.
Any profit through or arising out of the administration of the trust. Exception for trustee’s compensation
1. Lost value to trust Causation required No requirement that trustee personally benefited
2. Profit made by trustee Causation required No requirement that trust have suffered a loss
3. Lost profits Causation required Difficult to show
4. Punitive damages “[A]n intentional breach of a fiduciary duty is a tort justifying the award of exemplary damages.”
Typical grounds: Embezzlement Mismanagement Trustee becomes incompetent Trustee becomes insolvent For other cause, in the discretion of the court
Used if trustee threatens to commit a breach of trust. If trustee does not obey, punishable as contempt.
Used when court fears trustee will not obey injunction. “Receivership is an extraordinary harsh remedy and one that courts are particularly loathe to utilize.”
Court may determine any question arising during the administration of a trust.
Depends on state law
1. Knowledge New trustee knows (subjective) New trustee should know (objective) Plus 2. Improper Conduct e.g., not sue prior trustee
Goal = recover actual trust property from trustee or non-BFP. Double recovery (money and property) not allowed. What is the key benefit of the tracing remedy?
Trustee’s $Trust’s $Acc’t Balance Opening Balance (that is, before Trustee turns evil) 5000
Trust Property 1. Trustee embezzles $1, Trustee uses money to pay secured/priority creditor Trustee’s Secured/Priority Creditor 3. Beneficiary is subrogated to rights of “paid off” creditor 4. B uses rights of creditor against Trustee and Trustee’s other creditors
A creditor with the right to recover from several funds/items, must first resort to fund/item not subject to the rights of another creditor who has recourse to only one of the funds/items.
Example Trustee personally owns two assets: Asset A = $10,000 Asset B = $6,000 Beneficiary has claim for $5,000 against Asset A via subrogation due to Trustee’s embezzlement; no claim against Asset B Creditor has priority claim against both assets totaling $10,000.
Beneficiary has misappropriated or otherwise wrongfully dealt with trust property.
Consented to breach Participated in breach Agreed to be liable for trustee’s breach
E.g., beneficiary promises to add his/her own property to the trust and then fails to do so.
Party who breaches contract with trust. Tortfeasor who damages trust property. Etc.
The settlor may waive anything except if: 1. Illegal 2. Against public policy 3. Not waivable under state trust law
Requirements for valid release: Legal capacity Full information Written Not under threat (e.g., “no money unless you sign”)
The “last hope”
Typically, does not run from date of breach. Does discovery rule apply?
Unreasonable delay in asserting rights to disadvantage of defendant E.g., a good faith change in position.