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Searching 2021-2022 Session

The Vermont Statutes Online

 

Title 14A: Trusts

Chapter 010: LIABILITY OF TRUSTEES AND RIGHTS OF PERSONS DEALING WITH TRUSTEE

  • § 1001. Remedies for breach of trust

    (a) A violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust.

    (b) To remedy a breach of trust that has occurred or may occur, the Probate Division of the Superior Court may:

    (1) compel the trustee to perform the trustee's duties;

    (2) enjoin the trustee from committing a breach of trust;

    (3) compel the trustee to redress a breach of trust by paying money, restoring property, or other means;

    (4) order a trustee to account;

    (5) appoint a special fiduciary to take possession of the trust property and administer the trust;

    (6) suspend the trustee;

    (7) remove the trustee as provided in section 706 of this title;

    (8) reduce or deny compensation to the trustee;

    (9) subject to section 1012 of this title, void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; or

    (10) order any other appropriate relief. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. February 1, 2011.)

  • § 1002. Damages for breach of trust

    (a) A trustee who commits a breach of trust is liable to the beneficiaries affected for the greater of:

    (1) the amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred; or

    (2) the profit the trustee made by reason of the breach.

    (b) Except as otherwise provided in this subsection, if more than one trustee is liable to the beneficiaries for a breach of trust, a trustee is entitled to contribution from the other trustee or trustees. A trustee is not entitled to contribution if the trustee was substantially more at fault than another trustee or if the trustee committed the breach of trust in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries. A trustee who received a benefit from the breach of trust is not entitled to contribution from another trustee to the extent of the benefit received. (Added 2009, No. 20, § 1.)

  • § 1003. Damages in absence of breach

    (a) A trustee is accountable to an affected beneficiary for any profit made by the trustee arising from the administration of the trust, even absent a breach of trust. Nothing in this section limits a trustee's right to reasonable compensation under section 708 of this title.

    (b) Absent a breach of trust, a trustee is not liable to a beneficiary for a loss or depreciation in the value of trust property or for not having made a profit. (Added 2009, No. 20, § 1.)

  • § 1004. Attorney's fees and costs

    In a judicial proceeding involving the administration of a trust, the Probate Division of the Superior Court, as justice and equity may require, may award costs and expenses, including reasonable attorney's fees, to any party, to be paid by another party or from the trust that is the subject of the controversy. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. February 1, 2011.)

  • § 1005. Limitation of action against trustee

    (a) A beneficiary may not commence a proceeding against a trustee for breach of trust more than one year after the date the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust.

    (b) A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows or has reason to know of the potential claim or that the beneficiary had a duty to inquire further and the response to such an inquiry would have disclosed the potential claim. If written notice is given to the trustee by a beneficiary or representative within the time for commencing an action under subsection (a) of this section stating that the beneficiary or representative has received insufficient information from the trustee's report to determine whether to commence an action for breach of trust, the time for commencing an action shall be extended by six months. If no proceeding is commenced within the extended time, it shall be conclusively presumed that the report adequately disclosed the existence of any potential claim.

    (c) If subsection (a) of this section does not apply, a judicial proceeding by a beneficiary against a trustee for breach of trust must be commenced within three years after the first to occur of:

    (1) the removal, resignation, or death of the trustee;

    (2) the termination of the beneficiary's interest in the trust; or

    (3) the termination of the trust.

    (d) Subsections (a) through (c) of this section shall not apply to the filing of a petition in Probate Division of the Superior Court by the Attorney General for breach of trust against the trustee of a charitable trust with a principal place of administration in this State. The Attorney General may file a petition within three years after the potential claim arises. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. February 1, 2011.)

  • § 1006. Reliance on trust instrument

    A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent the breach resulted from the reliance. (Added 2009, No. 20, § 1.)

  • § 1007. Event affecting administration or distribution

    If the happening of an event, including marriage, divorce, performance of educational requirements, attainment of a specified age, or death, affects the administration or distribution of a trust, a trustee who has exercised reasonable care to ascertain the happening of the event is not liable for a loss resulting from the trustee's lack of knowledge. (Added 2009, No. 20, § 1.)

  • § 1008. Exculpation of trustee

    (a) A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that it:

    (1) relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries; or

    (2) was inserted as the result of an abuse by the trustee of a fiduciary or confidential relationship to the settlor.

    (b) An exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the exculpatory term is fair under the circumstances and that its existence and contents were adequately communicated to the settlor. (Added 2009, No. 20, § 1.)

  • § 1009. Beneficiary's consent, release, or ratification

    A trustee is not liable to a beneficiary for breach of trust if the beneficiary consented to the conduct constituting the breach, released the trustee from liability for the breach, or ratified the transaction constituting the breach, unless:

    (1) the consent, release, or ratification of the beneficiary was induced by improper conduct of the trustee; or

    (2) at the time of the consent, release, or ratification, the beneficiary did not know of the beneficiary's rights or of the material facts relating to the breach. (Added 2009, No. 20, § 1.)

  • § 1010. Limitation on personal liability of trustee

    (a) Except as otherwise provided in the contract, a trustee is not personally liable on a contract properly entered into in the trustee's fiduciary capacity in the course of administering the trust if the trustee in making the contract disclosed the fiduciary capacity. The addition of the phrase "trustee" or "as trustee" or a similar designation to the signature of a trustee on a written contract is considered prima facie evidence of a disclosure of fiduciary capacity.

    (b) A trustee is personally liable for torts committed in the course of administering a trust, or for obligations arising from ownership or control of trust property, including liability for violation of environmental law, only if the trustee is personally at fault.

    (c) A claim based on a contract entered into by a trustee in the trustee's fiduciary capacity, on an obligation arising from ownership or control of trust property, or on a tort committed in the course of administering a trust, may be asserted in a judicial proceeding against the trustee in the trustee's fiduciary capacity, whether or not the trustee is personally liable for the claim. (Added 2009, No. 20, § 1.)

  • § 1011. Interest as general partner

    (a) Except as otherwise provided in subsection (c) of this section or unless personal liability is imposed in the contract, a trustee who holds, in a fiduciary capacity, an interest as a general partner in a general or limited partnership is not personally liable on a contract entered into by the partnership after the trust's acquisition of the interest if the fiduciary capacity was disclosed in the contract. The requirement of disclosure in the contract will be satisfied if the trustee signs the contract or signs another writing which is contemporaneously delivered to the other parties to the contract in a manner that clearly evidences that the trustee executed the contract in a fiduciary capacity.

    (b) Except as otherwise provided in subsection (c) of this section, a trustee who holds an interest as a general partner is not personally liable for torts committed by the partnership or for obligations arising from ownership or control of the interest unless the trustee is personally at fault.

    (c) The immunity provided by this section does not apply if an interest in the partnership is held by the trustee in a capacity other than that of trustee or is held by the trustee's spouse or one or more of the trustee's descendants, siblings, or parents, or the spouse of any of them.

    (d) If the trustee of a revocable trust holds an interest as a general partner, the settlor is personally liable for contracts and other obligations of the partnership as if the settlor were a general partner. (Added 2009, No. 20, § 1.)

  • § 1012. Protection of person dealing with trustee

    (a) A person other than a beneficiary who in good faith assists a trustee or who in good faith and for value deals with a trustee without knowledge that the trustee is exceeding or improperly exercising the trustee's powers is protected from liability as if the trustee properly exercised the power.

    (b) A person other than a beneficiary who in good faith deals with a trustee is not required to inquire into the extent of the trustee's powers or the propriety of their exercise.

    (c) A person who in good faith delivers assets to a trustee need not ensure their proper application.

    (d) A person other than a beneficiary who in good faith assists a former trustee or who in good faith and for value deals with a former trustee without knowledge that the trusteeship has terminated is protected from liability as if the former trustee were still a trustee.

    (e) Comparable protective provisions of other laws relating to commercial transactions or transfer of securities by fiduciaries prevail over the protection provided by this section. (Added 2009, No. 20, § 1.)

  • § 1013. Certification of trust

    (a) Instead of furnishing a copy of the trust instrument to a person other than a beneficiary, the trustee of a trust at any time after execution or creation of a trust may execute a certificate of trust that sets forth less than all of the provisions of a trust instrument and any amendments to the instrument. The certificate of trust may be used as evidence of authority to sell, convey, pledge, mortgage, lease, or transfer title to any interest in real or personal property. The certificate of trust shall be upon the representation of the trustee that the statements contained in the certificate of trust are true and correct. The signature of the trustee must be under oath before a notary public or other official authorized to administer oaths. The certificate of trust must include:

    (1) the name of the trust, if one is given;

    (2) the date of the trust instrument;

    (3) the name of each settlor;

    (4) the name of each original trustee;

    (5) the name and address of each trustee empowered to act under the trust instrument at the time of execution of the certificate;

    (6) an abstract of the provisions of the trust instrument authorizing the trustee to act in the manner contemplated by the instrument;

    (7) a statement that the trust instrument has not been revoked or amended as to the authorizing provisions, and a statement that the trust exists;

    (8) a statement that no provisions of the trust instrument limit the authority so granted; and

    (9) a statement as to whether the trust is supervised by any court and, if so, a statement that all necessary approval has been obtained for the trustee to act.

    (b) A certificate of trust executed under subsection (a) of this section may be recorded in the municipal land records where the land identified in the certificate of trust or any attachment to it is located. When it is so recorded or filed for recording, or in the case of personal property, when it is presented to a third party, the certificate of trust serves to document the existence of the trust, the identity of the trustee, the powers of the trustee and any limitations on those powers, and other matters set forth in the certificate of trust, as though the full trust instrument had been recorded, filed, or presented.

    (c) A certificate of trust is conclusive proof as to the matters contained in the certificate, and any party may rely upon the continued effectiveness of the certificate unless:

    (1) a party dealing with the trustee has actual knowledge of facts to the contrary;

    (2) the certificate is amended or revoked under subsection (d) of this section; or

    (3) the full trust instrument including all amendments is recorded or filed.

    (d) Amendment or revocation of a certificate of trust may be made only by a written instrument executed by the trustee of a trust. Amendment or revocation of a certificate of trust is not effective as to a party unless that party has actual notice of the amendment or revocation. For purposes of this subsection, "actual notice" means that a written instrument of amendment or revocation has been received by the party or, in the case of real property, that either a written instrument of amendment or revocation has been received by the party or that a written instrument of amendment or revocation identifying the real property involved has been recorded in the municipal land records where the real property is located.

    (e) A certification of trust may be signed or otherwise authenticated by any trustee.

    (f) A certification of trust need not contain the dispositive terms of a trust.

    (g) A recipient of a certification of trust may require the trustee to furnish copies of those excerpts from the original trust instrument and later amendments which designate the trustee and confer upon the trustee the power to act in the pending transaction. Nothing in this subsection shall be construed to require a trustee to furnish the entire trust instrument to the recipient of a certification of trust.

    (h) A person who in good faith enters into a transaction in reliance upon a certification of trust may enforce the transaction against the trust property as if the representations contained in the certification were correct.

    (i) This section does not limit the right of a person to obtain a copy of the trust instrument in a judicial proceeding concerning the trust. (Added 2009, No. 20, § 1; amended 2009, No. 92 (Adj. Sess.), § 11.)