Question: My mother created a revocable trust which names her as the sole Trustee. The trust provides that at her death, the assets of the trust will be divided among her four children. My mother needs the income from the trust for her support right now and has changed the investment allocation to invest heavily in bonds. My brother (one of the remainder beneficiaries) believes that as Trustee, my mother owes a duty to the other remainder beneficiaries and therefore can force her to invest for growth and income (as opposed to income). Is that true?
Answer: While it is true that a Trustee for many trusts generally has a duty to both the current income beneficiary and future remainder beneficiaries, this duty does not hold true for a revocable trust. The Maryland Court of Special Appeals weighed in on this topic of duties owed to remainder beneficiaries of a revocable trust. The court determined that the Trustee of a revocable trust does not owe a fiduciary duty to contingent remainder beneficiaries of the trust while the settlor is living. Therefore, your brother would not be successful in trying to force a reallocation of the trust investments assuming your mother wishes to invest solely in income producing assets.
As always, if you have any questions or would like to learn more, please let me know.
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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