A Fiduciary is a person placed in a position of trust, whether as an Executor, Agent under a Power of Attorney, Health Care Agent, or Trustee.\u00a0 Any Fiduciary has a sacred legal duty to carry out the responsibilities bestowed by the governing document, whether it is a Will, Power of Attorney, Health Directive, or Trust Agreement. \u00a0A Trustee has the duty to carry out the provisions of the Trust Agreement and preserve the trust assets for the benefit of the named beneficiaries.\u00a0 All too often, however, Trustees misconstrue their considerable power as license to use trust assets for their own personal gain.<\/p>\n
The recent case of In the Matter of the Estate of Harry J. Lerner, deceased<\/u><\/strong>, is a text book example of a Trustee who abused her discretion and paid the price for it.\u00a0 Mr. Lerner created a Revocable Trust in 1997.\u00a0 He served as his own Trustee until he fell and broke his hip in 2008, at which point, one of his daughters, took over as Successor Trustee.\u00a0 Until that fall, Mr. Lerner had lived in a co-op apartment in Brooklyn, but afterward, he lived in a nursing facility in Morristown until his death in 2012.<\/p>\n Mr. Lerner had two other daughters.\u00a0 The Trust Agreement provided that other than cash bequests of $25,000 to each of Mr. Lerner\u2019s grandchildren, the remaining trust assets would be split equally among the three daughters upon their father\u2019s passing.\u00a0 As was her right, one daughter, requested information regarding the trust assets from the Trustee, and demanded access to the co-op.\u00a0 The trustee refused despite repeated requests.\u00a0 The aggrieved daughter then brought suit to remove the Trustee and alleged that she had used the trust assets for her personal benefit.<\/p>\n Phyllis hired a forensic accountant who discovered that the Trustee used trust assets to pay her personal mortgage and other personal house-related expenses, credit card bills and her daughter\u2019s college costs.\u00a0 She also failed to list the co-op for sale after her father\u2019s fall, even though it was apparent that he would never return, thereby incurring unnecessary expenses to maintain the apartment for years.<\/p>\n After the trial, the Judge removed the Trustee and found her liable for almost $150,000 in damages, including lost revenue on improper withdrawals and lost income as a result of her failure to list the co-op for sale, plus interest at 4%.\u00a0 Moreover, the Judge ordered that the Trustee pay the accounting fees, counsel fees and costs incurred by Phyllis.\u00a0 While New Jersey generally abides by the \u201cAmerican Rule,\u201d which requires each party to pay their own legal fees regardless of the result of litigation, the court included the costs as an element of damages arising from the Trustee’s breach of fiduciary duty.\u00a0 The Appellate Division affirmed the Judge\u2019s decision in full.<\/p>\n