Disclaimer: This article is for informational purposes and does not constitute legal advice.
Detailed Answer
Under New York law, a trustee must administer trust assets in the beneficiaries’ best interests. If a trustee misuses trust funds, beneficiaries can take the following steps to challenge that misconduct.
1. Demand an Accounting
Start by requesting a formal accounting. New York Estates, Powers & Trusts Law (EPTL) §11-1.1 grants beneficiaries the right to review trust transactions and balances. You can send a written demand to the trustee specifying the period and type of transactions you want documented. A trustee who refuses may face court sanctions.
Link: EPTL §11-1.1
2. Petition the Surrogate’s Court to Surcharge
If the accounting reveals unauthorized withdrawals or losses, beneficiaries can file a surcharge petition under Surrogate’s Court Procedure Act (SCPA) §711. A surcharge forces the trustee to reimburse the trust for any improper distributions or fees.
Link: SCPA §711
3. Seek Trustee Removal
When breaches of fiduciary duty occur, beneficiaries may ask the court to remove the trustee under SCPA §713. Grounds include self-dealing, failure to account, or gross mismanagement.
Link: SCPA §713
4. Request Injunctive Relief or Temporary Restraining Order
To prevent further misuse, you can seek injunctive relief in Supreme Court or Surrogate’s Court to freeze trust assets or halt transactions. This remedy stops ongoing harm while your case proceeds.
5. Replace the Trustee
Upon removal, the court can appoint a successor trustee under EPTL §11-3.3. This ensures a qualified fiduciary manages the trust going forward.
Link: EPTL §11-3.3
Helpful Hints
- Keep written records of all communications and transactions.
- Consult a trust attorney early to ensure proper court filings.
- Act promptly—New York’s statute of limitations for breach of fiduciary duty is generally three years.
- Consider mediation or settlement before litigation to save time and costs.
- Review the trust instrument carefully; it may specify unique removal procedures.