In re Trusts for Stefanidis-Perez is a consolidated case involving two trusts in which the plaintiff is the beneficiary and the defendant (plaintiff’s mother) is the trustee. The plaintiff-beneficiary moved for partial summary judgment seeking to compel an accounting and seeking the removal of the defendant-trustee, and the defendant-trustee cross-moved for summary judgment for advice and direction regarding her right to withhold distributions pursuant to one of the trusts.

The plaintiff-beneficiary’s unopposed motion for an accounting was granted.

The plaintiff-beneficiary’s motion to remove her mother as trustee was based on the following alleged breaches of her fiduciary duty: self-dealing; imprudent investment; hostility toward the beneficiary; and the fact that the trustee had decanted $1.8 million from the one trust (which entitled the beneficiary to net income at age 22 and principal distributions beginning at age 30) into the second trust (in which the beneficiary had no access to income or principal, except at the discretion of the trustee, until age 65).

The court found that issues of fact prevented summary judgment on all other claimed breaches of fiduciary duty, but concluded that the trustee had not breached her fiduciary duty by decanting the funds from one trust to another.

Decanting is the distribution of trust property from one trust into another trust, “pursuant to the trustee’s authority to make distributions to, or for the benefit of, one or more beneficiaries.”   Decanting can involve a partial distribution of trust property, or the entire principal of a trust. Although the court recognized that New Jersey does not have a state decanting statute, it found that our common law permits “a trustee who has the ability to distribute principal outright from a trust to or for a beneficiary may instead exercise such authority by distributing the assets in further trust for the beneficiary,” pursuant to Wiedenmayer v. Johnson. In the Stefanidis-Perez trust from which funds were decanted, although that trust did not expressly permit decanting, the court found that the trustee permissibly decanted because the trust gave her absolute discretion to invade principal.

With respect to the cross-motion seeking instructions and advice from the court, relying upon the Restatement (Second) of Trusts and Tannen v. Tannen, the court concluded that summary judgment was appropriate and that the trustee had authority to withhold mandatory distributions under the terms of the trust.

A copy of Stefanidis-Perez can be found here –  In re Trusts for Stefanidis-Perez, Docket No. CP-248-14 (Essex County, March 22, 2016)

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