N.Y. Estates, Powers and Trusts Law 11-2.3-A – Judicial control with respect to fiduciary's power to adjust
§ 11-2.3-A Judicial control with respect to fiduciary's power to adjust
Terms Used In N.Y. Estates, Powers and Trusts Law 11-2.3-A
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Fiduciary: A trustee, executor, or administrator.
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
(a) Judicial control of adjustment power.
A court shall not change a fiduciary's decision to exercise or not to exercise an adjustment power conferred by subparagraph 11-2.3(b)(5) unless it determines that the decision was an abuse of the fiduciary's discretion. A court shall not determine that a fiduciary abused his, her or its discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion.
(b) Applicable decisions.
The decisions to which paragraph (a) applies include:
(1) A determination under subparagraph 11-2.3(b)(5) of whether and to what extent an amount should be transferred from principal to income or from income to principal.
(2) A determination of the factors that are relevant to the trust and its beneficiaries, the extent to which they are relevant, and the weight, if any, to be given to the relevant factors, in deciding whether and to what extent to exercise the power conferred by subparagraph 11-2.3(b)(5).
(c) Authorization for court to remedy abuse of discretion.
If a court determines that a fiduciary has abused his, her or its discretion, the court may restore the income and remainder beneficiaries to the positions they would have occupied if the fiduciary had not abused his, her or its discretion, according to the following rules:
(1) To the extent that the abuse of discretion has resulted in no distribution to a beneficiary or a distribution that is too small, the court shall require the fiduciary to distribute from the trust to the beneficiary an amount that the court determines will restore the beneficiary, in whole or in part, to his or her appropriate position.
(2) To the extent that the abuse of discretion has resulted in a distribution to a beneficiary that is too large, the court shall restore the beneficiaries, the trust, or both, in whole or in part, to their appropriate positions by requiring the fiduciary to withhold an amount from one or more future distributions to the beneficiary who received the distribution that was too large or requiring that beneficiary to return some or all of the distribution to the trust.
(3) To the extent that the court is unable, after applying subparagraphs (1) and (2), to restore the beneficiaries, the trust, or both, to the positions they would have occupied if the fiduciary had not abused his, her or its discretion, and if the court finds that the fiduciary was dishonest or arbitrary and capricious in the exercise of his, her or its discretion, the court may require the fiduciary to pay an appropriate amount from his, her or its own funds to one or more of the beneficiaries or the trust or both.
(d) Petition by fiduciary.
Upon a petition by a fiduciary who is authorized to exercise an adjustment power conferred by subparagraph 11-2.3 (b)(5), the court having jurisdiction over the trust or estate may determine whether a proposed exercise or nonexercise by the fiduciary of the adjustment power will result in an abuse of the fiduciary's discretion. If the petition describes the proposed exercise or nonexercise of the power and contains sufficient information to inform the beneficiaries of the reasons for the proposal, the facts upon which the fiduciary relies, and an explanation of how the income and remainder beneficiaries will be affected by the proposed exercise or nonexercise of the power, a beneficiary who challenges the proposed exercise or nonexercise has the burden of establishing that it will result in an abuse of discretion.