State appellate courts are dealing with a developing split of authority about what fiduciary duties a trustee owes tobeneficiaries of a revocable trust. In 2011, the issue arose for the first timein Missouri. A Missouri appellate court ruled that the trustee did not owe afiduciary duty to the beneficiaries before the settlor’s death. The courtreasoned that because there is no fiduciary duty, the beneficiaries are notguaranteed an accounting prior to the settlor’s death. Other states that have reached a similar legal conclusion are Louisiana, Arizona, and Michigan.Conversely, in 2012 the California Supreme Court ruled in favor of preventing harmto the beneficiaries’ interests. Boiled down the holding states, a beneficiarymay review the acts of the trustee while the settlor was alive, but only afterthe settlor dies. The California Supreme Court’s ruling is similar to Florida’slegal conclusion.
Recently, the Iowa Supreme Court held thatthe state’s statutory code addressed the duty to account. Under the state statute, thesettlor is the only person permitted to request an accounting for the revocableperiod of the trust. This statute is similar to Missouri’s appellate courtoutcome. Surprisingly, the Iowa case was also a case of first impression. Instates that have not ruled on the issue, it will be difficult for trustee’s topredict which legal outcome the court will side with.
See Luke Lantta, Iowa Weighs In On Fiduciary Duty To Account To Beneficiaries Of Revocable Trusts, BryanCaveFiduciaryLitigation.com, Feb. 4, 2013.
