New York Probate and Estate Administration Lawyer Blog
A trustee is responsible for managing trust property, making distributions to beneficiaries when appropriate, and carrying out the wishes of the person who created the trust. Although beneficiaries may disagree with a trustee’s decisions, not every disagreement is grounds for removal. In Matter of Damiano, the Appellate Division, Third Department, considered when a New York court may remove a trustee and what evidence is required to justify that decision.
Background
Jennifer Damiano created separate trusts for her two children through her will. The trusts were to hold the children’s inheritance until each child reached age 25. She appointed a close friend as trustee and gave the trustee broad authority to manage the trust assets, make investments, approve distributions, and hire attorneys when necessary.
After Ms. Damiano died in 2020, the children’s other parent became both the administrator of the estate and the children’s guardian. The trustee began managing the trusts in 2023.
Over time, disagreements developed about how the trusts were being managed. The guardian claimed that the trustee waited too long to place trust money into interest-bearing accounts, improperly refused requests to distribute money for the children’s benefit, and spent too much trust money on legal fees.
The guardian asked the Surrogate’s Court to remove the trustee, appoint someone else to serve as trustee, require the trustee to repay the legal fees, and award attorney’s fees.
The Surrogate’s Court denied the request, and the guardian appealed.
Issue
When can a New York court remove a trustee because of disagreements over the way the trust is being managed?
Holding
The Appellate Division held that the evidence did not justify removing the trustee because the petitioner failed to show serious misconduct or that the trustee’s actions harmed the trusts or prevented them from serving their intended purpose.
The court did, however, rule that before ordering the petitioner to personally pay the trustee’s attorney’s fees, the petitioner was entitled to an opportunity to challenge the amount of those fees.
Discussion
The court explained that removing a trustee is an extraordinary step. Because the person who created the trust personally selected the trustee, courts are generally reluctant to remove that individual unless there is strong evidence that the trustee has failed to perform the job properly.
The guardian argued that the trustee delayed investing trust funds, refused to approve requested distributions, and paid excessive attorney’s fees.
The court found that the evidence did not support those claims.
After receiving the trust funds, the trustee deposited them, researched appropriate accounts, consulted with legal counsel, and transferred part of the money into interest-bearing savings accounts while keeping enough funds available to pay trust expenses. Because the trust gave the trustee broad discretion over investment decisions, the court concluded that these actions were reasonable.
The court also found that the trustee did not improperly refuse to make distributions for the children. Instead, the trustee simply asked for invoices and other documentation before approving payments. The court concluded that requesting documentation was consistent with the trustee’s responsibility to protect trust assets.
The guardian also argued that the trustee spent too much trust money on attorneys. Although the guardian ad litem agreed that the legal fees were significant, the guardian ad litem also concluded that the trustee hired counsel in good faith because of the ongoing disputes with the petitioner. The Appellate Division agreed that the Surrogate’s Court acted within its discretion in finding the fees reasonable.
Because the evidence did not show serious misconduct, mismanagement, or harm to the trusts, the court concluded that removing the trustee was not warranted.
The Appellate Division reached a different conclusion regarding the attorney’s fees that the petitioner had been ordered to pay personally. Although the court agreed that sanctions may be appropriate in certain cases, it held that the petitioner should have been given an opportunity to challenge the amount and reasonableness of those fees before they were awarded. The case was therefore sent back to the Surrogate’s Court for further proceedings on that issue.
Conclusion
Matter of Damiano demonstrates that a trustee will not be removed simply because beneficiaries or family members disagree with the trustee’s decisions. A court generally requires evidence that the trustee engaged in serious misconduct or failed to carry out the responsibilities of the position before removing the person chosen by the creator of the trust. If you have questions about trustee duties, trust disputes, or fiduciary litigation, an experienced New York probate lawyer can explain your rights and help protect your interests.