That there is a duty of inquiry into the needs of the beneficiary follows from the requirement that the trustee's power must be exercised with that soundness of judgment which follows from a due appreciation of trust responsibility.
Sara Wirt Marsman died in September, 1971, survived by her second husband, T. Frederik Marsman, and her daughter by her first marriage, Sally Marsman Marlette. Mr. James F. Farr, her lawyer for many years, drew her will and was the trustee thereunder. Farr, as the trustee, had the power under a testamentary trust to pay principal to a beneficiary for his support and maintenance. Aside from one payment, the Farr never made any payments to the beneficiary and, as a result, the beneficiary had to convey his house. The probate court agreed that Farr, who had the discretionary power to pay principal for support and maintenance, had a duty to inquire into the financial resources of a beneficiary under a testamentary trust and should have made distributions to the beneficiary so that he could have kept the house. Farr appealed.
Does a trustee have a duty to inquire into the financial resources of that beneficiary so as to recognize his needs?
The court agreed with the probate court's finding but disagreed as to the remedy. The court found that the trustee failed in his duty of inquiry into the needs of the beneficiary. The court determined, however, that the proper remedy was not to set aside the conveyance but to determine the amounts which should have been paid to the beneficiary to enable him to keep the house, and to pay that amount from the trust to the beneficiary's estate. The court also found that the exculpatory clause which had been drafted by the trustee was effective and thus the trustee would not be personally charged. The court affirmed the denial of attorney fees to the executrix as within the discretion of the probate court.