In New Jersey, it appears that there is a formal and an informal way to close out and finalize a trust. It is in the best interests of all trustees to know the differences. The formal method is for the Trustee to file an accounting with the Superior Court pursuant to N.J.S.A § 3B:17-3 and R. 4:87. However, there is an exception to this requirement if the trustee has been discharged from doing so by the beneficiaries. See N.J.S.A. § 3B:17-1; R. 4.87-9. Under N.J.S.A. § 3B:17-1, a trustee “need not render or settle an account if the [trustee] files with the court a release or discharge from the beneficiary, ward, or cestui que trust who has reached majority and is not incapacitated.” N.J.S.A. § 3B:17-1. In fact, the NJ Practice Series states that “[i]n over 95% of all estates, trusts and guardianships, no account is filed; the fiduciary prepares an informal account for the benefit of the persons for whom he acts and secures their releases.” Therefore, a trust may be informally settled by written release from the beneficiaries.
This informal process is also permitted under the Uniform Trust Code. Pursuant to N.J.S.A. § 3B:31-27, a trust may be terminated by the consent of all beneficiaries. N.J.S.A. § 3B:31-27(a). To terminate a trust in this manner, the Court must find that (1) all beneficiaries consent to the termination of the trust, and (2) “continuance of the trust is not necessary to achieve any material purpose of the trust.” N.J.S.A. § 3B:31-27(b). Further, N.J.S.A. § 3B:31-78 states that “[a] trustee is not liable to a beneficiary for breach of trust if the beneficiary, while having capacity, consented to the conduct constituting the breach, released the trustee from liability for the breach.” N.J.S.A. § 3B:31-78. Therefore, a trustee is relieved of their duty to settle the trust account with the Superior Court if they have received a release and refunding bond from each beneficiary permitting them to do so.
To discuss your NJ Trust matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Trust Attorney