USA – MASSACHUSETTS Law and Practice Contributed by: Patricia Annino, Rimon, P.C.
the trustee from committing a breach of trust; compel - ling the trustee to redress a breach of trust by paying money, restoring property or other means; ordering a trustee to account; appointing a special fiduciary to take possession of the trust property and adminis - ter the trust, suspend or remove the trustee, reduce or deny compensation to the trustee, or order other appropriate relief. 6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries Professional trustees, lawyers and corporate fiduciar - ies are common in Massachusetts. Professional trus - tees are held to a higher standard of duty. Trustees who have special skills or expertise are held to higher standards. 6.2 Fiduciary Liabilities Fiduciaries can be held personally responsible when they breach a fiduciary duty. A trustee can be held personally liable, but only if the trustee was personally at fault. Indemnification and exculpatory clauses are important to limit the liability for breach. An exculpa - tory clause is unenforceable if it relieves the trustee of liability for a breach committed in bad faith or with reckless indifference to the trust or beneficiaries, or if the clause was placed in the trust due to abuse by the fiduciary in relationship with the settlor, unless it is proved the settlor knew of the clause and under - stood it. 6.3 Fiduciary Regulation The Massachusetts Prudent Investor Act (MGL c 203C) governs a fiduciary’s investment of assets and mandates that a trustee must invest the trust as a prudent investor (it also notes that a higher standard of care applies to professional or corporate trustees). The trustee must exercise reasonable skill and care in administering the trust. The standard of reasona - bleness is in light of the facts and circumstances. In addition to the duty of prudent administration, the trustee has other fiduciary duties including the duty to inform and report; to collect, control and protect the trust property; to enforce and defend claims, a duty of impartiality, and a duty of loyalty.
It is important to note that under case law even the broadest discretionary powers in a trust are subject to judicial review. 6.4 Fiduciary Investment See 6.3 Fiduciary Regulation pertaining to the Massa - chusetts Prudent Investor Act. The law provides that the prudent investor rule may be expanded, restricted, eliminated or altered by the terms of the trust. Typi - cally, in a trust, broad investment powers are included to address diversification and asset selection chal - lenges. Trustees are generally required to promptly dispose of unsuitable investments and diversify assets in accordance with the Prudent Investor Act. The trust can provide that a trustee can opt out of this require - ment and that is very helpful when there are unique assets such as a closely held business in a trust. If the intent is to retain risky assets, the trust document should specify that. Massachusetts law does not dis - allow any particular asset class. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship A person’s domicile or legal residence is their true home or main residence. A person can have multi - ple homes but only one domicile. According to the Massachusetts Department of Revenue, the legal residence is usually where someone maintains the most important family, social, economic, political and religious ties, and it depends on all the facts and cir - cumstances of each case, including good faith. Other factors include where vehicles are registered, voter registration, address used on a driver’s licence, loca - tion of bank accounts, brokerage accounts and credit card accounts, and the governing law in estate plan - ning documents (health-care proxy, durable power of attorney, will, trust, etc). Domicile for estate tax purposes is determined by the facts and circumstances of the taxpayer’s life, taking into account subjective intent. Each person keeps their present domicile until a new domicile is established. A new domicile may be acquired by abandoning the current domicile, estab -
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