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Does this make the trust invalid?

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Muisyle

Junior Member
What is the name of your state (only U.S. law)? New York

In reviewing my copy of the Irrevocable Family Benefit Trust agreement which I did not receive until its closing and disbursement after my father's death, I noticed my brother was named the "initial Independent Trustee." Is my understanding correct that as a son and beneficiary, he should not have been named and does this make the trust invalid?

Thank you for responding to my question!
 


anteater

Senior Member
I can't imagine that it would. A beneficiary is often named as a trustee.

Where did you derive your understanding?
 

Muisyle

Junior Member
It's in the wording of the Trust agreement:

Appointment of Trustees.

(a) Settlor (my father via my sister's PoA) appoints Settlor's son, [my brother's name], and Settlor's daughter, [my sister with PoA's name], to serve as Trustees of all trusts created by this Trust Agreement. [They] shall each have the authority to appoint his/her own successor Trustee to act in his/her own place, provided, however, any successor Trustee must be an "Independent Trustee", as such term is defined under the paragraph of the Article below titled "Independent Trustee".

(b) Settlor shall not, at any time, have any right or power to become a Trustee of any trust created by this Trust Agreement.


Family/Independent Trustee. There shall be at least two (2) Trustees of each trust created hereunder serving at all times: a Family Trustee and an Independent Trustee.

(a) The "Family Trustee" shall be related to me by blood or marriage or shall be an individual who is familiar with Settlor's family and, more particularly, with the needs and interests of the beneficiaries of the particular trust of which such person is the Family Trustee. Subject to the provisions of the following sentence of this subparagraph (a), each Family Trustee shall have the authority to appoint additional Family Trustees and/or a successor Family Trustee to serve in his or her place. Settlor's daughter, [my sister with PoA's name], shall be the initial Family Trustee of each trust created hereunder.

(b) The term "Independent Trustee" shall mean, collectively, all persons, corporations, partnerships or associations who have no beneficial interest vested or contigent in the property of the trust of which they are trustees and who, with respect to the person or persons who have authority to appoint such Independent Trustee, are not "related or subordinate parties" as that term is defined in Code Section 672(c).

(i) Settlor's son, [my brother's name], shall be the initial Independent Trustee of each trust created hereunder.

(ii) An individual named an Independent Trustee must be sui juris and neither a beneficiary hereunder nor related to any beneficiary hereunder and is (A) experienced in business or finance or (B) an attorney experienced in the trust and tax fields;
Now that I typed this part out,
(b) Settlor shall not, at any time, have any right or power to become a Trustee of any trust created by this Trust Agreement.
, I also question if my sister with PoA should have appointed herself as a Trustee? Our father was in a nursing home with advanced dementia at the time this Trust agreement was created. This sister also went against the explicit advice of my father's longtime lawyer in creating the trust in the first place (i.e., that it was "ridiculous" since "he's not going to live 5 more years") which the lawyer shared with me (she's also my attorney) long after the fact.
 
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anteater

Senior Member
I almost began to respond before seeing your edit and was going to ask what the point of this trust agreement was if your father was already suffering from advanced dementia.

Let me ask this first... Were you damaged in any way by the creation of this trust or its administration? In other words, would you have received more from your father's estate if this trust had not existed?

The question about brother and "independent trustee"... Unless there were irregularities in the trust administration and/or distribution of the assets, I have to think that this issue would be treated as a "No harm, no foul" situation.

As to the creation of the trust, you would need to look closely at the POA document - and probably need to have a NY attorney review it - to determine if 1) it was durable and survived your father's incompetence, and 2) it conveyed the power to create a trust. And then on to the question of whether the trust terms significantly advantaged your sister and whether any of it would constitute a violation of her fiduciary duty through self-dealing.

It really goes back to the first question: were you harmed? Since you say that the trust has been administered and assets distributed, it's difficult and expensive to get the cats back in the bag after they've been let out.
 

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