Since time immemorial the chancery court has been the safe harbor that equity has afforded the trustee who is in reasonable doubt as to his fiduciary rights, duties, and obligations, or who finds himself an innocent bystander in a dispute among beneficiaries that is compromising his ability to properly perform his fiduciary duties. The duties assumed by a trustee are myriad and onerous. Among them is the affirmative duty to carry out the terms of the trust. But what if a critical term is patently or latently ambiguous? A trustee who misdelivers trust-accounting income and/or principal, for example, violates that duty and may be held personally, even absolutely, liable for the consequences of the violation. What then is the innocent trustee who is reasonable doubt as to who is entitled to what to do? Get a legal opinion, distribute, and hope for the best? Not a good idea. Recall that even a trustee whose good faith reliance on faulty legal advice has led him to misdeliver the trust property is not necessarily immune from personal liability for the adverse economic consequences of that reliance, a topic that is taken up generally in §8.32 of Loring and Rounds: A Trustee’s Handbook (2022). As between the innocent beneficiary and the innocent fiduciary, the latter should bear the burden of any consequential economic loss.

Equity vests in the trustee a constellation of fiduciary rights to lighten somewhat his fiduciary burdens, one of which is the right at trust expense to seeks instructions or a declaratory judgment from the equity court when there is reasonable doubt. It is well-established that a trustee cannot be held liable for abiding by a court order, no matter how erroneous that order may be. (Whether there may be a duty to appeal the order is a wholly different matter. See §6.2.6 of the Handbook). That “well-established” special immunization from fiduciary liability is, in a nutshell, the “safe harbor” equity affords trustees. See Bangert v. Northern Trust Co., 839 N.E.2d 640, 645-646 (Ill. 2005). The fiduciary duty is to carry out the true terms of the trust; the fiduciary right is to seek at trust expense the assistance of the court when there is reasonable doubt as to what those terms actually are. When there is reasonable doubt, a trustee who fails to exercise that right, again, a right that is exercisable at trust expense, has only himself to blame for the consequences.

The constellation of fiduciary rights that equity vests in trustees is taken up generally in

§3.5.2 of Loring and Rounds: A Trustee’s Handbook (2022), which section and its sub-sections are reproduced in their entirety in the appendix immediately below. The 2022 Edition of the Handbook is available for purchase at: https://law-store.wolterskluwer.com/s/product/loring-rounds-a-trustees-handbook-2022e-misb/01t4R00000OVWE4QAP.