July 9th, 2012
Most grantors understand that their trustee shouldn’t have a court looking over its shoulder every time it exercises a discretionary power. That’s why trustees are granted discretionary powers.
Despite a grantor’s broad grant of authority to a trustee, however, trustees often find themselves embroiled in litigation over the exercise of a discretionary power, particularly with respect to discretionary distributions.
In Thompson v. Anthony (unpublished), in the context of an unjust enrichment claim, the Appeals Court of Massachusetts considered the implication of a trust provision giving the trustees “absolute discretion” over distributions.
The court’s succinct quote sums it up nicely:
Here, the trust granted the trustees “absolute discretion” in relation to distributions. The trust placed no restrictions on the trustees’ discretion and did not require that the beneficiaries receive equal or specified shares. In fact, under the terms of the trust, the trustees’ discretion is such that the plaintiffs are not guaranteed to receive any portion of the trust. As such, the plaintiffs could not have had a “reasonable expectation” to the properties in question.