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Criteria for Denial of Trustee Commission for Misconduct Explained (Commission Was Not Denied Here)

The First Department explained the criteria for determining whether a trustee can be denied an annual commission for misconduct.  The court ultimately concluded the commission should not be denied in this case:

We conclude that courts have the discretion to take into consideration all of a trustee’s misconduct in determining the grant of annual commission, even conduct that occurred after the period applicable to the commission. Although there are no appellate cases on point, no New York case holds otherwise. As a basic principle, the Surrogate has broad discretion to deny commission to a trustee if the trustee has engaged in misconduct … . In determining if a commission should be denied, misconduct that is not directly related to the commission being sought may be taken into consideration … . The Restatement (Second) of Trusts § 243 supports this conclusion with a multi-factor analysis (Comment c). Among the factors to be considered under the Restatement in determining if a commission should be denied are whether the trustee acted in good faith, if the misconduct related to management of the whole trust and if the trustee completed services of value to the trust (id.). We conclude, therefore, it is within the court’s discretion to determine whether the trustee’s later misconduct bars her from receiving commission.

Trustees can be denied commission “where their acts involve bad faith, a complete indifference to their fiduciary obligations or some other act that constitutes malfeasance or significant misfeasance” …. The denial of a commission, however, should not be “in the nature of an additional penalty” (Restatement 243, Comment a). Rather, it should be based on the trustee’s failure to properly serve the trust, not designed as an additional punishment … . Indeed, even the beneficiaries in this case state that it will be rare that a trustee’s later misconduct will serve as the basis for a denial of commission. Matter of Gregory Stewart Trust, 2013 NY Slip Op 06079, 1st Dept 9-26-13

 

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