When Two's a Crowd: Conflicts Between Co-Trustees Often Result in Legal Intervention

It is often the case that two or more individuals are named trustees in a trust document.  A trustee is an individual who manages and distributes trust assets, and co-trustees perform these duties together.  Sometimes co-trustees must agree on all actions taken on behalf of the trust.  Other times, co-trustees exercise their powers independently.  Either way, when conflict between trustees leads to mismanagement of trust property, it is likely that one of them will be removed from the position.

That is what happened in Deneny v. Rossem (NY County Supreme Court, Dec. 29, 2011, 2011 NY Slip Op 52420(U)).  It is a somewhat bizarre case about a brother and sister and a 20-unit apartment building in Manhattan, half of which allegedly became filled with excrement, vermin, and garbage (… oh my!).  The apartment building was placed in trust by John Deneny, the parties’ father, and, as co-trustees, John’s son, Sean, and daughter, Barbara, were to manage the property for their ultimate benefit.

Sean and Barbara seemed to agree to take responsibility for different aspects of the property’s management, but, according to Sean, while he was out of state for a number of years, havoc – and insects – broke loose.  Sean also alleged that Barbara was “physically, emotionally, and verbally abusive toward him and his children.”  The Court held that whether or not her fault, it was clear the Barbara was unable to manage the property, and that she had therefore violated the trust.  The Court also found problematic the significant brother-sister conflict, conveying that when conflict prevents a co-trustee’s proper trust administration, such conflict is reason alone for removal.

In removing Barbara from her position and leaving Sean to manage the trust on his own, the Court cited New York state law, but similar laws exist in Maryland, Virginia, and the District of Columbia.  Maryland’s Code does not explicitly state that a co-trustee duel will lead to a trustee’s removal, however, it does provide, for example, that a fiduciary will be removed if he demonstrates that he is incapable of doing his job:  Maryland Code Annotated, Estates and Trusts § 15-112.  Virginia and D.C. are more explicit, stating that a trustee may be removed if “[l]ack of cooperation among cotrustees substantially impairs the administration of the trust":  Code of Virginia § 64.2-759(B)(2); District of Columbia Code § 19-307.06(b)(3).

While it is important to be aware that you may be removed as a trustee for the reasons above, you should also note that a beneficiary or other third party may attempt to hold you responsible for another co-trustee’s breach of his or her duties.  If you have any questions about your obligation in this regard, or if you need help determining how to manage a difficult co-trustee, give us a call at (301) 468-3220, or email us at liz@altmanbackup.peakperformance.dev.  Note that if sought reasonably under the circumstances, the trust will pay for the advice of experts like lawyers and accountants; and, yes, the trust may pay for exterminators, too.

-  Gary Altman, Esq., Brenda Bosch, Esq. and Coryn Rosenstock   

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