Can a Trustee Live on Trust Property in New York City? Do They Have to Pay Rent?

Whether a trustee can live on trust property and whether a beneficiary has the obligation to pay rent depends on the language of the trust agreement.

The trust agreement controls the duties, obligations, and benefits of the trustee and beneficiary. In the absence of an express provision granting the trustee the right to live on trust property, the trustee cannot live on trust property. Without any right to live on trust property, if the trustee still continues to live there, then the trustee must pay rent.

When Trustee Possesses Trust Property

Usually, a trustee does not have the right to occupy trust property unless the trustee is also a beneficiary. It is a major problem when the trustee occupies trust property because the trustee is supposed to manage trust property and not occupy it. The beneficiary cannot simply evict the trustee because it is not the beneficiary’s duty to manage trust property. It is the trustee’s duty to manage trust property. Thus, a trustee’s occupation of trust property without the right of possession could be considered a breach of fiduciary duty.

Procedure to Follow in Removing a Trustee From Trust Property

Because a beneficiary, not being the manager of trust property, cannot simply evict the trustee, the beneficiary must first file a petition to the court for the removal of the trustee on the ground of breach of fiduciary duty plus payment of damages.

A beneficiary does not have access to trust funds, and for this reason, the legal fees for this petition will come out of the beneficiary’s pocket. However, if the beneficiary is successful in proving the trustee’s breach of fiduciary duty and removing the trustee from office, the beneficiary may request the court to charge his legal fees to the trust.

Appointment Of Successor Trustee

Together with the petition to remove the trustee is a petition to appoint a successor trustee. Thus, the petition must already include the name of the nominated successor trustee. Usually, it is the petitioning beneficiary who seeks appointment as successor trustee. Upon removal of the current trustee and absent any disqualifying circumstances, the successor trustee will be issued letters of trusteeship.

Surcharge

When the trustee is found to be in breach of his fiduciary duties, the court may order the trustee to be surcharged. The surcharge will charge the trustee the amount of damages the trust incurred due to the trustee’s breach of fiduciary duties. In this case, it would include the rent for the period the trustee occupied the property plus damages.

Eviction

Once a successor trustee is appointed by the court, the successor trustee will then have the legal personality and standing to file eviction proceedings against the previous trustee who is occupying trust property. The successor trustee may also decide to negotiate a lease agreement with the trustee under fair and reasonable terms, in lieu of filing eviction proceedings.

Trust matters can be complex especially when a trustee himself breaches his fiduciary duties. A beneficiary may feel helpless, especially since it is the trustee who has been tasked with administering and managing the trust property. Should you need assistance in handling trust matters, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].