N.Y. Estates, Powers & Trusts Law § 11-2.3-a: Judicial control with respect to fiduciary's power to adjust

§ 11-2.3-A Judicial control with respect to fiduciary's power to adjust

(a) Judicial control of adjustment power.

A court shall not change a fiduciary's decision to exercise or not to

exercise an adjustment power conferred by subparagraph 11-2.3(b)(5)

unless it determines that the decision was an abuse of the fiduciary's

discretion. A court shall not determine that a fiduciary abused his, her

or its discretion merely because the court would have exercised the

discretion in a different manner or would not have exercised the

discretion.

(b) Applicable decisions.

The decisions to which paragraph (a) applies include:

(1) A determination under subparagraph 11-2.3(b)(5) of whether and to

what extent an amount should be transferred from principal to income or

from income to principal.

(2) A determination of the factors that are relevant to the trust and

its beneficiaries, the extent to which they are relevant, and the

weight, if any, to be given to the relevant factors, in deciding whether

and to what extent to exercise the power conferred by subparagraph

11-2.3(b)(5).

(c) Authorization for court to remedy abuse of discretion.

If a court determines that a fiduciary has abused his, her or its

discretion, the court may restore the income and remainder beneficiaries

to the positions they would have occupied if the fiduciary had not

abused his, her or its discretion, according to the following rules:

(1) To the extent that the abuse of discretion has resulted in no

distribution to a beneficiary or a distribution that is too small, the

court shall require the fiduciary to distribute from the trust to the

beneficiary an amount that the court determines will restore the

beneficiary, in whole or in part, to his or her appropriate position.

(2) To the extent that the abuse of discretion has resulted in a

distribution to a beneficiary that is too large, the court shall restore

the beneficiaries, the trust, or both, in whole or in part, to their

appropriate positions by requiring the fiduciary to withhold an amount

from one or more future distributions to the beneficiary who received

the distribution that was too large or requiring that beneficiary to

return some or all of the distribution to the trust.

(3) To the extent that the court is unable, after applying

subparagraphs (1) and (2), to restore the beneficiaries, the trust, or

both, to the positions they would have occupied if the fiduciary had not

abused his, her or its discretion, and if the court finds that the

fiduciary was dishonest or arbitrary and capricious in the exercise of

his, her or its discretion, the court may require the fiduciary to pay

an appropriate amount from his, her or its own funds to one or more of

the beneficiaries or the trust or both.

(d) Petition by fiduciary.

Upon a petition by a fiduciary who is authorized to exercise an

adjustment power conferred by subparagraph 11-2.3 (b)(5), the court

having jurisdiction over the trust or estate may determine whether a

proposed exercise or nonexercise by the fiduciary of the adjustment

power will result in an abuse of the fiduciary's discretion. If the

petition describes the proposed exercise or nonexercise of the power and

contains sufficient information to inform the beneficiaries of the

reasons for the proposal, the facts upon which the fiduciary relies, and

an explanation of how the income and remainder beneficiaries will be

affected by the proposed exercise or nonexercise of the power, a

beneficiary who challenges the proposed exercise or nonexercise has the

burden of establishing that it will result in an abuse of discretion.