Estate planning clients often have a great deal of questions about their responsibilities as a trustee of their living trust. Where the acting trustee is likewise the creator or “grantor” of the trust, the trustee normally has plenary power to act on behalf of the trust and may amend or perhaps revoke the trust in its whole.
When a grantor passes away or becomes unable to administer their trust, a follower trustee normally takes over these commitments. It seeks this point, when a successor trustee begins to administer the living trust, that concerns frequently develop with regard to the trustee’s responsibilities.
For one of the most part, a trustee administers a living trust by its composed terms, which express the grantor’s intent. See Cal. Probate Code 16000, 21101 and 21102. However, this can be much more complex than it sounds. California courts are quicker permitting celebrations to present outside evidence of a grantor’s objectives, even where the language utilized in the trust is clear and unambiguous. The effect of this pattern is that grantors should be a lot more mindful to consider whether their living trust explains their intentions exactly, and after that take the extra action of considering whether there is sufficient other proof to show what their intentions are with regard to the administration of their trust assets.
Trustee’s Standard of Care
A trustee’s legal requirement of care is a developing location of law. In general, California courts translate a trustee’s standard to be really high. A grantor may restrict or expand a trustee’s commitments through the language contained in the trust instrument itself. Section 16040 of the California Probate Code sets out the basic standard of trustee care:
(a) The trustee shall administer the trust with sensible care, ability, and care under the scenarios then prevailing that a prudent person acting in a like capacity would utilize in the conduct of a business of like character and with like goals to achieve the purposes of the trust as determined from the trust instrument.
(b) The settlor may expand or limit the standard supplied in subdivision (a) by express provisions in the trust instrument. A
(c) This section does not use to financial investment and management functions governed by the Uniform Prudent Investor Act, post 2.5 (starting with Area 16045).
Where a trustee has unique skills, he/she is needed to utilize those abilities with regard to administering a trust. Cal. Probate Code 16014. In addition, a trustee may not delegate duties that the trustee can reasonably be anticipated to perform. In practice, it is not uncommon for trustees to entrust some obligations. See Cal. Probate Code 16001(a), 16012, 16052, and 16247. A few of the responsibilities that a trustee may entrust are investment, tax, legal and accounting services, which are types of services most trustees would not be expected to perform. A trustee should still act wisely in choosing which representatives to utilize, and should continue to supervise those representatives. They may not just entrust jobs to others and forget it.
Other Trustee Duties
In lots of scenarios, a trustee will have a commitment to provide an accounting and other information to the called beneficiaries of a living trust. See Cal. Probate Code 16060-61.5, 16061.7, 16062, and 16064. As one might expect, a trustee likewise has a task of privacy. A trustee might need to disclose some details in order to administer the living trust. Perhaps most significantly, a trustee needs to not put his/her interests above those of the trust or the beneficiaries, and need to avoid conflicts of interest with the trust and the recipients. This can be a specifically complex commitment to fulfill for lots of trustees because they are frequently not only a trustee, but also among several recipients called in the living trust. Unless the trust indicates otherwise, such a trustee must not prefer a specific recipient or class of beneficiaries and prevent even the look of a dispute of interest.
A living trust will usually consist of some language which provides the trustee discretionary powers– the power to use his or her own best judgment in specific situations. Take care here. Even if a trust supplies a trustee with sole, absolute or uncontrolled discretion, California courts normally still need trustees to act within the established requirements of care and not in bad faith or with disregard to the express purposes of the living trust. See Cal. Probate Code 16080-81.
With regard to investing trust assets, a trustee needs to make decisions which remain in the very best interest of the recipients, subject to any restrictions provided for in the trust. A trustee’s authority to handle financial investments must be set out in the trust instrument itself. Where the statement of trust is quiet or ambiguous, investment authority is also derived by statute, case law and the scenarios of each scenario. See Cal. Probate Code 16200(a) and (b) and 16047. Usually, a trustee has the commitment to invest trust possessions as a “sensible financier”, which is set out in the California Uniform Prudent Financier Act (the “Act”), unless the trust offers a higher or lesser standard of care:
(a) Other than as offered in neighborhood (b), a trustee who invests and manages trust possessions owes a duty to the beneficiaries of
(b) The settlor may broaden or limit the prudent financier guideline by express provisions in the trust instrument. A trustee is not
Cal. Probate Code 16045 through 16054.
For trustees who are dealing with investment assets, it is important to thoroughly evaluate the language of the Act for assistance and seek guidance from an experienced estate planning lawyer if they do not totally understand their obligations.
Remember that the law alters frequently. You need to seek advice from a suitable professional if you have questions about a specific scenario. Provided here are some of the typical duties of trustees administering a living trust. A well-informed estate planning attorney can discuss your specific needs.