A trustee's duty to communicate is twofold: It includes an affirmative obligation to inform beneficiaries of certain information and an obligation to respond to beneficiaries' reasonable requests for information. Trustees should also be aware that a settlor may only go so far in terms of limiting a trustee's duty to communicate. Similarly, a trust's exculpatory clause may not necessarily protect a trustee from liability for violation of the duty to communicate.
Acting As Successor Trustee
While the opportunity to serve as a successor trustee may seem attractive, it may not always be in your best interest to take on such a role. Depending on the history of the trust, the job can actually be fraught with peril.
A trust may find itself with a vacant trustee position for a variety of reasons. Researching the history of the trust, and those who served as its trustee, is critical. A high turnover rate of trustees should send up a red flag: It may indicate that the beneficiaries are fairly contentious and that a trustee may quickly find himself in their crosshairs.
A potential successor trustee should understand the nature of the trust's assets and assess their suitability. Before taking on the role of successor trustee, the predecessor trustee should be required to dispose of any unsuitable assets, if possible. Similarly, the prospective successor trustee should be satisfied that the current trustee has fulfilled his duties.
If a predecessor trustee failed to adequately communicate with beneficiaries, or exhibited other lapses in management, it can create problems for his successor. While a successor trustee is not liable for his predecessor's breach of fiduciary duty, he can be held liable for failing to seek redress against the predecessor for any such breach. To avoid being sued by a beneficiary, a successor trustee may find himself in the position of having to sue his predecessor.
Such litigation can involve extra complications if the successor trustee is a trusted advisor who has had prior dealings with the trust. The highest court of at least one state has held that, where a successor trustee is in place, the statute of limitations on a claim against the predecessor trustee begins to run when the successor knew, or reasonably should have known, of the predecessor's breach, irrespective of the beneficiaries' actual knowledge of the breach. In that case, the court found that what the successor trustee knew or should have known prior to his appointment triggered the running of the statute of limitations.
Mark S. Furman is a shareholder and chair of the Litigation Department at Tarlow, Breed, Hart & Rodgers, P.C. in Boston. He has over 30 years of experience representing clients in litigation, including trust and estate disputes.
Emily C. Shanahan is of counsel at Tarlow, Breed, Hart & Rodgers, P.C. in Boston. She concentrates her practice in litigation, including trust and estate disputes.