USA – NEW YORK Law and Practice Contributed by: John M Teitler, Nancy A Murphy and Constance E Shields, Teitler & Teitler LLP
6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries Corporate fiduciaries are often used. There is no high - er standard of conduct, as all trustees are held to a fiduciary duty. Fees can be high but are subject to negotiation. 6.2 Fiduciary Liabilities A fiduciary owes a duty of care and prudence and may be personally liable for a breach of fiduciary duty. A fiduciary cannot be exculpated from acting in bad faith, but provisions can be included in the operative instrument to limit exposure to the fiduciary, such as an express provision that a fiduciary will not incur lia - bility in the absence of bad faith and indemnification In the United States, particularly in New York, fiduci - aries are required to use prudent judgment to invest trust assets. Typically, trustees contract with third- party advisers to make investment decisions. 6.4 Fiduciary Investment It is common for the trust or similar legal document to grant a fiduciary broad authority over the invest - ment of trust assets, while also explicitly excluding any requirement to diversify those investments. Addi - tionally, a trust may hold ownership of a closely held business, as specified by the terms outlined in the trust instrument. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship A person can have only one domicile at a given time, and it is generally considered to be the place with which a person has a sufficient degree of permanent contacts and to which a person intends to return and/ or has a permanent home. Indicia of domicile can include a driver’s license, voter’s registration, and vehicle registration, as well as club memberships and affiliations with religious houses of worship, among other things. of the trustee by the trust. 6.3 Fiduciary Regulation
of a professional valuation specialist. Other options include establishing family limited partnerships and
implementing buy-sell agreements. 4.3 Transfer of Partial Interest
A discount is usually applied to the fair market value of the transfer of a partial interest in an entity. This is a technique commonly used by US estate planners. 5. Wealth Disputes 5.1 Trends Driving Disputes Disputes arise from a wide variety of issues, including: • testator/donor capacity; • interpretation/language construction of instru - ments; • implementation/administration of a trust/estate; • management of corpus; and • guardianship proceedings, among many others. Disputes may be between and among fiduciaries, beneficiaries, third-party creditors, and/or govern - mental taxing authorities or law enforcement agen - cies. Recent trends include: • increasingly aggressive enforcement proceedings by federal and state tax authorities against high net worth individuals and trusts; • divorce-related litigation against trustees, grantor- spouses and/or beneficiary-spouses; and • “know-your-customer” and related fiduciary risks associated with connections to sanctioned indi - viduals. 5.2 Mechanism for Compensation The remedies available to claimants are extremely wide-ranging and include money damages, declara - tive judgments, rescission, trust reformation, injunc - tive and other equitable relief, and appointment of a guardian (over person and/or property), among other forms of relief.
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