New York Trustee's Duty to Inform

By Ronald A. Fatoullah, Esq. and Yan Lian Kuang-Maoga, Esq.

{3:44 minutes to read} Trusts are widely used for a multitude of reasons. In creating a trust, a legal relationship is established between the named trustee and the beneficiaries of the trust. While a trustee is endowed with many powers over the trust, this trusteeship also comes with many duties. The duty to inform is one that we will explore in this article.

New York State law does not currently require a trustee to disclose any information relating to the trust unless requested to do so by a beneficiary. In these situations, the trustee may simply provide the information requested. It is important for any trustee to keep open communication with beneficiaries and even good practice to disclose information about the administration of the trust. This is important because a trustee has a duty to act in good faith; therefore, open disclosure of information is generally indicative of a trustee acting accordingly.

For this reason, a trustee can also elect to provide information to a trust's beneficiaries of his own accord.

The content and timing of such disclosures initiated by the trustee depend on the type of trust and the needs of the beneficiaries. A trustee should closely review and familiarize himself with the terms of the trust and the intent of the creator of the trust. The trustee should identify the beneficiaries of the trust and determine their interest-which could be an interest in current income generated by the trust's assets, an interest in the principal, or an interest in the remainder.

Generally, at a minimum, it is recommended that a trustee provides a copy of the trust and the contact information of the trustee to all the current beneficiaries. Once a trust terminates, remainder beneficiaries should be informed of the termination of the trust and be given another copy of the trust, along with the contact information of the trustee. The following are additional items of information a trustee may elect to disclose depending on the circumstances:

• The expected timeframe for any distributions from the trust;

• The method to request payment from the trust when the trust gives a beneficiary the right to request payments (For example, in a special needs trust, the beneficiary must send his or her bills to a trustee to be paid directly to vendors);

• Restrictions on the trustee relating to distributions (For example, a trust may provide that trust funds can be used for all expenses except to purchase cigarettes);

• Annual informal account; and

• Compensation of the trustee and the method of calculation.

Without specific guidance from the law, a trustee should review with her attorney what information, if any, she should disclose. It is critical for a trustee to recognize that she has a duty to be loyal to the beneficiaries of the trust. While the law does not require the trustee to disclose information unless she is asked, it is best practice for the trustee to maintain a good relationship with beneficiaries. A trustee should avoid the appearance of hiding information from the beneficiaries. A trustee can avoid any unnecessary legal proceedings against her and the resulting liability by having open communication with the beneficiaries.

Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Yan Lian Kuang-Maoga is an elder law attorney with the firm. The law firm can be reached at 718-261-1700, 516-466-4422, or toll-free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also a partner with Advice Period, a wealth management firm, and he can be reached at 424-256-7273.