ABSTRACT
Trustee succession and indemnification are important mechanisms in trust administration but the interaction of these rules has generated uncertainties as to the relationship between successive trustees, key among which are whether the former trustee: can retain and withhold transferring trust assets against the successor trustee; has priority to indemnification over the successor trustee where trust assets are inadequate to satisfy both fully; and is owed a fiduciary duty (or any other duty) by the successor trustee. Also, there is the question whether the trustees’ respective unsecured trust creditors have any claim to the trust fund, including via subrogation. This article answers these questions by starting with a different conception of the incumbent trustee’s indemnity to show that succession fundamentally alters the process of indemnification, generating a new entitlement in favour of the former trustee who assumes the position of a (preferential) beneficiary. The article uses its analysis to resolve the uncertainties relating to priority, retention, fiduciary loyalty and creditors.
Hudson, Jessica, Trustee Succession and Indemnification (March 8, 2024). Accepted for publication in the Australian Law Journal, (2024) 98 ALJ (forthcoming, June issue).
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