Thank You For Submiting Feedback!
A trustee who is also a beneficiary and who is given a power, or discretion, to invade the trust principal has a fiduciary obligation to the remaindermen to keep her demands within reasonable limits. Even an unlimited power of invasion is subject to implied limitations to protect the remaindermen.
On April 9, 1970 the settlor, Frederick L. Way, established two inter vivos trusts: A Florida trust, for the joint benefit of himself for life and appellee, Elaine J. Holly, and of which he and Elaine J. Holly were named co-trustees, and a "Massachusetts Fund" trust under which Mesler Jr. et al, the settlor's great grandchildren, were the principal beneficiaries. The Florida trust instrument provided that upon the death of the settlor the aforesaid Elaine J. Holly would be the sole beneficiary with remainder over to the aforementioned Massachusetts trust. In his will, which he executed the following day, the settlor provided that the residue of his estate pour over into the Florida trust. Appellee O. Ray Gussler is a successor to the decedent as a co-trustee of the Florida trust. Frederick L. Way died on October 20, 1972, and since that time Elaine J. Holly and the aforesaid O. Ray Gussler have acted as co-trustees under the Florida trust, although it is apparent that Gussler has been acting as such more nominally than actually. Indeed, it appears, at one point he ostensibly resigned but reconsidered and now remains at least a nominal co-trustee. The trial court correctly recognized, among others, that the settlor's intent is the polestar by which a trust instrument should be interpreted and construed. Accordingly, he concluded that since the settlor vested the co-trustees with absolute discretion to ". . . distribute so much of the principal of the trust estate as the co-trustees deem necessary to maintain the standard of living to which Elaine J. Holly has become accustomed," authority was vested solely in the trustees to determine Elaine J. Holly's standard of living and to distribute such principal as is necessary in their discretion for her to maintain that standard.
Does the amended complaint of Mesler Jr. et al set forth facts on which they could be awarded any relief?
Allegations that a trustee is the sole lifetime beneficiary, that she has not furnished any accounts or reports of her administration to the remaindermen and that she is not confining her invasions of principal to reasonable limits, as may be set out in the complaint, give rise to an inference of abuse of discretion by the trustee and are sufficient to require the trustee to respond. Trustees are accountable to the courts and their performance may be controlled by the courts. If the evidence discloses any abuse of discretion on the part of a trustee or co-trustees in distributing principal to a lifetime beneficiary, particularly if such beneficiary is a trustee, then the trial court can order appropriate adjustments to correct any abuses in the past and take steps (e.g., to require bonding of trustees, periodic accountings to remaindermen and appropriate supervisory measures) to prevent abuses in the future.