(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 of the potential claim or should have inquired into its existence.
(c) If subsection (a) does not apply, a judicial proceeding by a beneficiary against a trustee for breach of trust must be commenced within six 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;
(3) the termination of the trust; or
(4) the open repudiation by the trustee.
Current New York law prescribes a six-year statute of limitations applicable to enforcement of a trustee's obligations.16 Under New York case law, the statute of limitations period does not begin to run until there is an open repudiation of the trustee's obligations to administer the trust estate that is clearly made known to the beneficiaries.17
It is not always obvious what acts trigger the running of the statute, which issue frequently is the subject of litigation. For example, several years ago, the Court of Appeals was called upon to decide when the statute of limitations governing a proceeding to compel the trustee to account commenced where a trustee had resigned and was replaced by a successor. There, the court upheld the reversal of the Surrogate and held that limitations period runs from the date the trusteeship is turned over to a successor.18
Some also question New York's rule from a policy perspective. For example, many trustees are surprised to learn that full disclosure to a beneficiary of an act or transaction performed in good faith during the course of the trustee's stewardship does not commence the running of the statute of limitations for a claim of breach of duty regarding such transaction, as it does not constitute an open repudiation of the trustee's obligations.19 Thus, many practitioners think that the rule can discourage voluntary disclosure.
The Radigan committee's proposal attempts to address these problems. First, it sets forth a detailed list of events that trigger the running of the limitations period. Second, it promotes voluntary disclosure by trustees by reducing the limitations period from six years to one year if certain requirements are met. In order to benefit from the reduced limitations period, the trustee must (1) disclose enough information so that a beneficiary either has knowledge of a potential claim for breach of duty or a reasonable basis to inquire into whether such a breach occurred, and (2) advise the beneficiary of the time period during which a proceeding must be commenced.20 The thought is that even beneficiaries will benefit from this rule, as it will increase their knowledge of how a given trust is being administered and allow them to act before evidence gets stale and parties can no longer be found.
Trust Combination, Division
UTC §417 states:
(a) After notice to the qualified beneficiaries, a trustee may combine two or more trusts into a single trust or divide a trust into two or more separate trusts, if the result does not impair rights of any beneficiary or adversely affect achievement of the purposes of the trust.
(b) Unless the terms of the trust provide otherwise, the commissions allowed to a trustee as determined under article twenty-three of the surrogate's court procedure act, as amended from time to time, shall not be increased by reason of the establishment of separate trusts pursuant to this section unless the court otherwise permits an increase, provided, however, that such trustee shall be entitled to charge the trust for any additional reasonable and necessary expenses incurred in the administration of such separate trusts.
In connection with this proposed statute, the Radigan committee's proposal recommended the repeal of EPTL 7-1.13, the latter of which codifies New York's current law on trust.