Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

When Does A Claim Against a Trustee Arise Under The Uniform Trust Code

Author: Scarinci Hollenbeck, LLC

Date: February 5, 2014

Key Contacts

Back

It is difficult to ascertain when a claim against a trustee arises because the act giving rise to the claim may not be disclosed to the beneficiary. Therein lies the tension between the common law traditions of statute of repose (limitations) and the Doctrine of Laches (“Laches”).

Laches attempts to impose a standard that recognizes a reasonable balance of the interests of the two sides. The beneficiary may not be aware of he trustee’s breach of duty for many years after the event so it is unfair to impose a deadline measured from the date of the breach. It is also unfair that a trustee face potential liability forever. Laches attempts to balance the competing interests by requiring the beneficiary to bring an action within a reasonable time of learning of the event of breach giving rise to the claim.

When does a beneficiary learn of the breach and gain sufficient knowledge of the law to know he or she has a claim against the trustee?  This intensely factual inquiry consumes considerable resources before the alleged breach of duty is analyzed and debated.

The Uniform Trust Code (UTC) attempts to provide a greater measure of certainty in this murky area with a bright-line five (5) year statute of repose (limitations). The UTC calls for a trust beneficiary to bring an action against a trustee for breach of trust within five (5) years of: (1) removal, resignation of death of trustee; (2) termination of the beneficiary’s interest; (3) termination of the trust.

Two issues arise from the UTC’s five-year rule. First, a trustee that fails to report to the beneficiaries or adequately disclose sufficient information may not be able to avail itself of the rule. Some view this as encouraging a trustee not to disclose.  Others believe the requiring the trustee to report annually is sufficient.  Second, it is unclear what state law exceptions apply to the five year rule of the UTC.

We expect that three (3) exceptions toll the UTC’s five (5) year rule. Fraud is one exception, however, is not a specified exception in the UTC. Unjust enrichment may or may not toll the statute from running. Finally, trust reformation may avoid the five-year rule.

What happens when an attorney represents a trustee who has breached a duty? Does the attorney protect the trustee as an individual or as a fiduciary? Would the trustee have the benefit of the five-year statute yet the trustee’s agent and attorneys might not?  So far, it appears the UTC does not cover attorneys.  Is the imputation of knowledge of an agent to the trustee enough to overcome the five-year rule and snare the trustee?

At times, it is difficult to draw a bright line through equity’s maze of duty and doctrines.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Tariff Response Options for Small Businesses Facing Financial Distress post image

Tariff Response Options for Small Businesses Facing Financial Distress

The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]

Author: Brian D. Spector

Link to post with title - "Tariff Response Options for Small Businesses Facing Financial Distress"
Common Causes of Partnership Disputes and How to Resolve Them post image

Common Causes of Partnership Disputes and How to Resolve Them

Business partnerships, much like marriages, function exceptionally well when partners are aligned but can become challenging when disagreements arise. Partnership disputes often stem from conflicts over business strategy, financial management, and unclear role definitions among partners. Understanding Business Partnership Conflicts Partnership conflicts place significant stress on businesses, making proactive measures essential. Partnerships should establish detailed […]

Author: Christopher D. Warren

Link to post with title - "Common Causes of Partnership Disputes and How to Resolve Them"
President Trump's Termination of Member Gwynne Wilcox post image

President Trump's Termination of Member Gwynne Wilcox

On January 28, 2025, the Trump Administration terminated Gwynne Wilcox from her position as a Member of the National Labor Relations Board (NLRB or the Board). Gwynne Wilcox, a union side lawyer for Levy Ratner, was confirmed to the Board for an original term in 2021 and confirmed again for a successive five-year term expiring […]

Author: Matthew F. Mimnaugh

Link to post with title - "President Trump's Termination of Member Gwynne Wilcox"
How to Dissolve a Corporation in New Jersey: A Step-by-Step Guide post image

How to Dissolve a Corporation in New Jersey: A Step-by-Step Guide

Closing your business can be a difficult and challenging task. For corporations, the process includes formal approval of the dissolution, winding up operations, resolving tax liabilities, and filing all required paperwork. Whether you need to understand how to dissolve a corporation in New York or New Jersey, it’s imperative to take all of the proper […]

Author: Christopher D. Warren

Link to post with title - "How to Dissolve a Corporation in New Jersey: A Step-by-Step Guide"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!