SYRACUSE, NY - Understanding the legal duties and potential liabilities of serving as a trustee in New York is essential for anyone taking on this critical role. Central New York revocable trust lawyers from Davies Law Firm (https://davieslawfirm.com/the-role-of-a-trustee-in-new-york/) provide detailed insight into the responsibilities, challenges, and legal risks faced by trustees throughout New York State.
Taking on the role of a trustee means accepting a position of significant legal responsibility. A trustee must manage and protect the assets of a trust in strict accordance with New York law and the instructions set forth by the grantor. Central New York revocable trust lawyers Frederick P. Davies and William P. Davies stress that trustees must uphold fiduciary duties with diligence and care to avoid costly disputes or personal liability.
Serving as a trustee involves more than just good intentions; it requires daily attention to financial management, legal compliance, and beneficiary communication. According to Central New York revocable trust lawyers Frederick P. Davies and William P. Davies, any misstep, such as commingling funds, failing to diversify investments, or neglecting to file taxes, can have serious consequences. “Courts judge trustees by their actions and adherence to fiduciary standards, not by their motives,” the attorneys explain.
The core fiduciary duties in New York are loyalty, prudence, and impartiality. Frederick P. Davies and William P. Davies explain that the duty of loyalty prohibits self-dealing and commingling of funds, two violations that can result in immediate removal by the Surrogate’s Court. The duty of prudence, codified under the New York Prudent Investor Act, demands careful asset management and diversification. Meanwhile, impartiality requires trustees to balance the often competing interests of income and remainder beneficiaries, something that becomes particularly challenging in blended family scenarios.
“Trustees must act fairly and impartially toward all beneficiaries,” notes the article, highlighting that favoring one class of beneficiaries over another, even unintentionally, can lead to legal action. Frederick P. Davies and William P. Davies underscore that even a single imprudent decision can trigger multiple fiduciary breaches, exposing the trustee to personal financial risk.
Beyond duties, trustees are also granted certain powers under New York law to help them fulfill their obligations. These include the ability to invest, reinvest, sell property, collect income, and more, as outlined in Estates, Powers and Trusts Law (EPTL) § 11-1.1. However, the attorneys are clear that these powers do not exempt a trustee from responsibility. For example, selling a trust-owned home below market value, even if legally allowed, can still be deemed a breach of the duty of prudence.
Frederick P. Davies and William P. Davies also detail the day-to-day operations required of trustees. These include safeguarding assets, opening dedicated trust bank accounts, filing state and federal tax returns, keeping accurate records, and maintaining open communication with beneficiaries. Trustees are required to send out IRS Form 1041 and New York State IT-205 annually, along with Schedule K-1s to beneficiaries, an obligation that, if neglected, can result in penalties and personal liability.
The risks of failing in these duties are high. Trustees found to have caused harm through mismanagement or disloyalty may face a “surcharge action” in Surrogate’s Court. This legal remedy requires the trustee to reimburse the trust from their personal assets. The attorneys point out that common grounds for surcharge actions include fraud, failure to diversify investments, and using trust funds for personal expenses.
If the situation escalates, trustees may even be removed by the court. According to Frederick P. Davies and William P. Davies, removal can occur under New York’s SCPA § 711 and § 719 if the trustee is convicted of a felony, fails to account, mismanages assets, or commingles funds. Courts take these matters seriously, and even civil contempt or jail time can result from noncompliance, as seen in real-life cases cited in the article.
Frederick P. Davies and William P. Davies of Davies Law Firm emphasize that these obligations are not to be taken lightly. Anyone named as a trustee, or those considering establishing a revocable trust, should fully understand both the legal framework and the practical day-to-day expectations of the role.
Choosing to work with a knowledgeable Central New York revocable trust lawyer can help prevent future legal complications. Whether drafting a new trust or taking over as trustee, Frederick P. Davies and William P. Davies offer support designed to protect the trust, its assets, and the best interests of all beneficiaries.
Trust administration is complicated, but it doesn't have to be overwhelming. With careful planning and legal guidance from professionals like Frederick P. Davies and William P. Davies, trustees can carry out their roles with confidence. To ensure full compliance with fiduciary duties and to avoid the risks of mismanagement or liability, trustees are encouraged to seek legal support before making any major decisions related to trust assets or distributions.
About Davies Law Firm:
Davies Law Firm serves clients throughout Central New York with a focus on estate planning, trust administration, and asset protection. Led by attorneys Frederick P. Davies and William P. Davies, the firm provides practical guidance for trustees, beneficiaries, and individuals seeking to secure their legacy through legal planning.
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