Q: Can an appointed trustee destroy the trust property given to him? If given promissory note, is he liable for face value?
A trust was created for my benefit earlier this summer. A promissory note was given in trust to the trustees to be invested and utilized for specific purposes. The note transferred to the trustees is still currently in their possession. They have not performed the trust nor accounted as required per the trust instrument. It has come to my attention that there is some belief that the note given in trust is not liquid or the promissor on the note is not capable of paying if presentment is made. I have strong reason to believe that the note has been destroyed or abandoned as a result of this belief (not returned to the settlor). The promissory note requires a demand for payment (presentment) from a holder of the note in order to enforce the obligation. No demand for payment on the note has been made as required by the trustees. Who is liable if the note was destroyed, lost, stolen or abandoned? Is it the face value or liquidity of the note that determines the monetary liability?
A: A trustee has the duty to protect, collect and maximize the value of trust assets for the benefit of the beneficiaries, and intentionally destroying a trust asset would presumptively be a violation of that duty. However, it is possible that the note truly was uncollectible and it would cost the trust more to try to enforce it than could possibly be collected. It that was the case, it made sense not to try to collect it, but it still would not make sense to destroy it unless and until the statute of limitations had expired, and even then the trustee should not destroy it because it is a record of a trust asset that should be preserved. On the other hand, if the trustee had a conflict of interest that caused the trustee to destroy the note, then that would be a breach of fiduciary duty. This could be the case, for example, if the trustee and the maker of the note were related.
You should discuss the details of your situation with a trust litigation attorney in your area.
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