What's the "Even Hand Rule"...and When Might it Apply?
When discussing a trustee’s obligations, the duty to be “even handed” is often mentioned. However, it’s not always clear what the duty entails.
The even hand rule is sometimes described as an executor or trustee’s obligation to treat all the beneficiaries of an estate/trust equally. However, this isn’t quite accurate – sometimes, under a will/trust, beneficiaries will have different types of interests (e.g. one beneficiary receives a car, the other beneficiary receives the residue of the estate) – and the nature of those interests might dictate differential treatment.
A trustee’s duty to be even handed is perhaps better described as the duty to ensure that: (1) the beneficiaries receive what they are entitled to under the terms of the will/trust; (2) one beneficiary does not receive an advantage or bear a burden that other beneficiaries with the same interest do not receive/bear; and (3) the trustee is acting impartially.
A trustee’s obligation to be even handed can be effected by the terms of the will/trust. There are some situations where a trustee might be given discretion to prefer the interests of one beneficiary to the expense of others (such as when there’s a testamentary trust and the trustee has the discretion to pay capital of the trust to the benefit of an income beneficiary).
Still, even when a trustee has certain discretions, the even hand rule might nevertheless apply. Cullity J’s decision in Edell v. Sitzer includes a very helpful discussion of the impact that discretionary powers have on the even hand rule.
There are also situations where the terms of a will (or trust) are such that the trustee’s obligation to be evenhanded is completely ousted. Pattillo J’s recent decision in the Primo Poloniato Grandchildren’s Trust is an example of when that might occur.
In any event, the application and scope of the even hand rule is complex and can often cause confusion. A trustee who is concerned about her obligations in this regard is strongly advised to seek advice – making a wrong decision can result in personal liabilty on the part of the trustee.