Charles E. Rounds Jr.: One court fails to consider trustee’s non-statutory duty to carry out settlor’s wishes as manifested in trust’s terms, a duty that encompasses defending those terms (November 28, 2022)

Charles E. Rounds Jr., of Suffolk University Law School, has made available for download his article, “One court fails to consider trustee’s non-statutory duty to carry out settlor’s wishes as manifested in trust’s terms, a duty that encompasses defending those terms”, published in JDSUPRA. The abstract is as follows:

The trustee’s longstanding duty in equity to defend the trust’s terms. Unless applicable law provides otherwise, the trustee has an overarching duty to carry out the lawful intentions of the settlor as they have been duly manifested in the terms of the trust. Many a judicial decision in a trust matter opens with the maxim that settlor intent is the lodestar that must guide the court in its deliberations. A critical incident of the trustee’s duty to be guided by the settlor’s intentions as manifested in the trust’s terms is the duty to defend those terms. So also the equity court itself has an affirmative autonomous “administrative” duty to defend the manifest intentions of settlors who are deceased or not otherwise before the court. The court may not take its marching orders in this regard from the attorneys representing the other parties to a trust relationship, such as trust counsel and the lawyers for the beneficiary-litigants.

The Uniform Trust Code and the trustee’s duty to defend the trust’s terms. The UTC neglects to “state” in its Article 8 the trustee’s critical common law duty to defend the trust’s terms. But the UTC also neglects to expressly negate the duty. Thus, the duty remains very much alive and well in the jurisdictions that have enacted the UTC. “The UTC is supplemented by the common law of trusts and principles of equity.” Actually, vice versa is more precise. The application of the doctrines of deviation, reformation, modification, and rectification, topics that are taken up generally in §8.15.22 of Loring and Rounds: A Trustee’s Handbook (2023), are constrained and tempered by the trustee’s duty to defend. The UTC’s failure to expressly “state” the trustee’s duty to defend the trust’s terms is a trap for the unwary trust professional who labors under the misconception that in any given situation all applicable trust law lurks only within the UTC’s four corners. As an aside, the UTC’s failure to mention the trustee’s duty to defend the trust’s terms may well be to support the UTC’s most subversive and least publicized provision, namely the facially innocuous UTC §404 “benefit-of-the-beneficiaries” rule. The Rule is discussed in §6.1.2 of Loring and Rounds: A Trustee’s Handbook (2023), the relevant portion of which section is set forth in the appendix below. The Handbook is available for purchase at https://law-store.wolterskluwer.com/s/product/loring-rounds-a-trustees-handbook-2022e-misb/01t4R00000OVWE4QAP.

Click here to view Charles E. Rounds Jr.’s summary of “One court fails to consider trustee’s non-statutory duty to carry out settlor’s wishes as manifested in trust’s terms, a duty that encompasses defending those terms”

Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.

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