The Fourth Department of New York’s Appellate Division has held that the payment of a beneficiary’s college tuition and secondary school expenses by her father-co-trustee from trust assets did not constitute self-dealing . In the Matter of Burton Wallens, Deceased 816 N.Y.S. 2d 793 court upheld a lower court’s decision which dismissed the beneficiary’s objections and ruled that there had been no breach of fiduciary duty.
The interesting wrinkle in this case is that the co-trustee was obligated under the terms of a separation agreement to pay his daughter’s education expenses. His daughter claimed that because of this, his payment of her college expenses from the trust was self-dealing and a breach of fiduciary duty. The court determined, however that the provisions in the trust that it might be applied to defray the costs of the objectant’s education could not be nullified merely because this might relieve a trustee of what would otherwise be his or her parental responsibility to provide for the support, maintenance , and education of the beneficiary.
Here the lower court had originally sustained the daughter’s objections to her father’s applying trust funds to pay the expenses of her secondary education. The Appellate Division , however, found that the father did nothing wrong in following the directions set forth by the testator in this testamentary trust and that these expenditures were in keeping with the testator’s intent.