New York’s Fourth Department Appellate Division has handed a stunning blow to the Commandment to "Honor thy father and thy mother" when that Biblical directive conflicts with good old fashioned fiduciary obligations. In Re Mergenhagen 856 N.Y.S.389   reversed an earlier decision of the Erie County (Buffalo) Surrogate Barbara Howe which had dismissed a petition to remove a trustee of two irrevocable trusts and to annul the revocation of one of the trusts. In doing so, the court comes to two interesting findings .

In determining that the trust had not been properly revoked ,the court observed that  the one petitioner  was barred from seeking to annul the revocation of the trust because  she had executed a document terminating the trust twelve years earlier.  Not only had she waived her rights to sue for this relief by signing the document herself, but she was also barred by the doctrine of  laches  —  or simply waiting too long to exercise one’s rights (strict translation is actually "sitting on one’s rights").  The problem here was compounded by the fact that the other petitioner was only 21 at the time the termination was executed , but because it could not be shown that he was aware that the termination had been signed, he was therefore not precluded from seeking to annul the termination.

The court went on to rule that the trustee of the trust should be removed because his actions had been unduly favorable to his mother. By administering the trust for his mother’s benefit despite express language of the trust instrument which prohibited such conduct , and by displaying open hostility towards the other beneficiaries (it was also found that the trustee and his mother had comingled non-trust money with trust funds) , the trustee had violated his duty of undivided loyalty which prohibits a trustee from even placing himself or herself in a position of potential conflct with his or her duty to the trust.

As an aside, I would point out that the trustee may have had a more sinister motive in providing extra benefits to his mother. It may not just be a case of taking good care of mom. It may also be a situation where substantial funds were diverted from the body of the trust  and away from the other beneficiaries. The trustee then stands to benefit when mom passes away and he inherits from her. In this case, it would appear that the language of the trust instrument strongly condemned such a plan of action. It is therefore likely that, once removed, the trustee would be required to fully account and would then be  subject to a surcharge for the property which was improperly diverted to his mother

The report of this case is actually a pretty good  guide of "how not to administer a trust." It is also a pretty good reminder to those of us with trustee-clients that the average John Q. Trustee cannot be left indefinitely to his own devices. In the absence of some professional oversight, it is a sure bet that there will be hell to pay someday — along with some king-sized legal fees!