The Supreme Court has opined that a beneficiary has standing to sue a trustee for breach of trust to a settlor even when the breach occurred during the settlor's lifetime.
Generally, in a revocable trust, a settlor or a person who created it can revoke the trust during his or her lifetime. Any interest held by beneficiaries is merely contingent and can be eliminated by the settlor at any time. If a trustee of a revocable trust is someone other than the settlor, the trustee's fiduciary duty is to the settlor while he is still alive, not to the beneficiaries. During the settlor's lifetime, the trustee only needs to account to the settlor, and not the beneficiaries. When the settlor dies, the trust becomes irrevocable and the beneficiaries' interest in the trust vests. Based on the above, it appears that the beneficiaries only have standing to sue the trustee for events that transpired after the settlor's death as their interest has only vested at that time. However, what if the trustee committed a breach of fiduciary duty while the settlor was still alive and the trust was revocable, would beneficiaries have standing to sue the trustee after the settlor's death? This is the matter that was resolved in Giraldin v. Giraldin.
More on this topic in subsequent blog.
*This blog entry was not written by an Attorney and should not be construed as professional legal advice.